Tyson’s choice of CFO raises concerns over potential conflicts of interest

Tyson Foods Inc.’s decision to elevate its board chairman’s 32-year-old son to chief financial officer is in line with the company’s history of placing namesake founding family members in positions of power. But corporate governance experts say the appointment raises particular concerns about potential conflicts of interest.

The Springdale, Ark.-based company––which is largely controlled by the Tyson family––said Tuesday that John R. Tyson, who currently serves as executive vice president of strategy and chief sustainability officer, will step into the role of Chief Financial Officer on October 2. He succeeds Stewart Glendinning, who was appointed Chief Financial Officer in 2017 and will remain with the company. Mr. Tyson joined the firm in 2019 after working in investment banking at JPMorgan & Chase Co.

Although the company, which trades on the New York Stock Exchange, did not violate any securities regulations when it was appointed, observers say it raises questions about investor safeguards and the independence of the board. ‘administration. Mr. Tyson’s father, John H. Tyson, has served as chairman since 1998 and served as chief executive from 2000 to 2006. Mr. Tyson’s older aunt, Barbara Tyson, has served on the board since 1988.

The main problem facing the company’s board is to make sure it can end young Mr Tyson’s role if he doesn’t perform, despite the father-son relationship, a said Joseph Grundfest, a senior faculty member at the Stanford University Law and Business Schools Center for Corporate Governance. . “The central question is whether he is competent to serve as chief financial officer,” Mr Grundfest said.

There is no conflict of interest, a company spokesperson said of Mr Tyson’s appointment. Chief executive Donnie King, along with a 13-person board made up mostly of independent directors, oversees the performance of company executives, including the chief financial officer, the spokesperson said. The company declined to make Mr. Tyson or other family members available for comment.

The company has two classes of shares, each with different voting rights on matters such as director elections. Most investors are entitled to one vote per share, but the Tyson Limited Partnership, the entity that represents the family’s stake, owns nearly all of the shares with 10 votes for each share. The Tyson family owned nearly 71% of the total voting power as of December 2021, according to a securities filing.

“It’s worrying [that] they appointed a 32-year-old man with minimal financial experience, but that’s the risk minority shareholders take when they buy shares in a family business,” said Rebecca Scheuneman, a senior equity analyst working for the research arm of Financial -Morningstar services firm Inc.

Mr. Tyson will be the youngest CFO of an S&P 500 or Fortune 500 company when he takes over, according to Crist Kolder Associates, an executive search firm. This title is currently held by Kaes Van’t Hof, the CFO of Diamondback Energy Inc.,

who turned 35 in mid-April. The average age of CFOs at S&P 500 and Fortune 500 companies is 53.1 for men and 52 for women, said Crist Kolder.

Within the company, the young Mr. Tyson managed strategy, mergers and acquisitions, and procurement, including commodity purchases, as well as sustainability and other issues. The new chief financial officer will retain responsibilities for business development, strategy and sustainability, the company said. Mr. Tyson previously held positions in private equity, venture capital and investment banking, including at JP Morgan.

He earned a bachelor’s degree in economics from Harvard University and a master’s degree in business administration from Stanford University.

“Appointing your son as chief financial officer at a public company is rather unusual,” said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware. Such family relationships can compromise the independence of both parties, cause problems with disagreements or poor performance, and raise questions of favouritism, Mr Elson said. “It introduces a personal angle that shouldn’t be involved in professional relationships.”

Still, Mr. Tyson’s promotion is in line with the company’s practice of “keeping it in the family” and in line with other family businesses in which family members rise to leadership positions at a younger age than the norm at other companies, Cathy said. Logue, head of the financial agent practice at Stanton Chase, an executive search firm.

“Whether or not he is ready for the top spot remains to be determined, but he will benefit from a strong management team around him, including Stewart Glendinning,” Ms Logue said. The current Chief Financial Officer, Mr. Glendinning, will remain with the company and become President of the Prepared Foods Group.

Other examples of close family relationships in US public companies include Carvana Co.

the used-car retailer run by the Garcia family, the Cleveland-Cliffs steel and mining company Inc.

and automotive retailer Sonic Automotive Inc.

Sonic Automotive, based in Charlotte, North Carolina, is run by David Bruton Smith, son of O. Bruton Smith, the company’s founder and longtime chairman before his death earlier this year. Young Mr. Smith also sits on the company’s board of directors with his brothers, Marcus Smith and B. Scott Smith. The Smiths collectively control more than half of the company’s voting power as of March, according to a securities filing. Sonic did not respond to a request for comment.

Celso Goncalves, meanwhile, is the chief financial officer of Cleveland-Cliffs, based in Cleveland, and is also the son of the company’s chairman and CEO, Lourenco Goncalves. The chief financial officer has a strong financial background and has overseen as chief financial officer the company’s capital structure and growth and executed merger and acquisition transactions, a spokeswoman for Celso Goncalves said.

In 2012, Ernie Garcia III spun off Tempe, Arizona-based Carvana from DriveTime Automotive Group Inc., an auto dealership started in the 1990s by his father, Ernie Garcia II. Mr. Garcia II, although not an officer or director, owns about 85% of the company’s voting shares with his son, The Wall Street Journal reported in 2021. Carvana declined to comment.

Write to Jennifer Williams-Alvarez at jennifer.williams-alvarez@wsj.com

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