The company’s share price has fallen since the arrest in November of the CFO, the 32-year-old, fourth-generation heir apparent, on intoxication and trespassing charges.
By Chloe Sorvino
From a young age, John R. Tyson has been preparing to potentially take over the family business, Tyson Foods, the biggest U.S. meat company. He’s followed the prescribed path: Harvard, a Stanford MBA, a stint at JPMorgan, a lower-tier executive job at Tyson, then, last year, CFO. Now, however, the 32-year-old, fourth-generation scion could be a drag on the company just as it enters a rough year.
Tyson Foods shares have fallen 3% since John R. Tyson’s arrest in Fayetteville, Arkansas, on November 6 after a stranger found him passed out in her bed. That isn’t much, but the S&P 500 has risen 5.5% in the same time period.
On Tuesday, the city of Fayetteville settled with John R. Tyson, who pleaded guilty to charges of public intoxication and criminal trespass and agreed to pay a $150 fine for each charge. Since the Tysons, along with the Waltons of Walmart fame, have been such a prominent family in the state for so long, it might be natural to think that the young Tyson might have gotten a special break, but prosecutor Brian Thomas said the deal is “no better or worse” than those for anyone charged with the misdemeanors.
“The ongoing practice of appointing family members to C-suite positions … creates governance risk relating to conflicts of interest and independence.”
Tyson Foods has hung tough during the biggest dose of inflation in 40 years, notching $4.4 billion in operating income in 2022, little changed from the year before. During a November call with analysts and investors announcing earnings, John R. Tyson apologized for his actions on the night of his arrest, saying he was “embarrassed” and took “full responsibility.” “This was an incident inconsistent with our company values, as well as my personal values,” he said. It was his first earnings call since becoming CFO.
The company’s next earnings announcement, on February 6, promises to have a different flavor. Tyson, with more than $50 billion in annual revenue from processing beef, chicken and pork, is about to deal with tougher market conditions. Its commercial flocks will continue to be threatened by the worst outbreak of avian flu in American history. After killing more than 58 million birds, the illness has pushed up prices on eggs and chickens. And after drought ravaged cattle herds last year, analysts expect profits from beef will be challenged until 2025.
But it’s the company’s response to John R. Tyson’s behavior — a stern finger-wag — that helped lead Moody’s Investors Service last month to downgrade Tyson’s ESG Credit Impact Score to “highly negative,” citing issues with the company’s governance.
“How it was handled by Mr. Tyson and the company’s board of directors diminishes management and board credibility and raises further questions about the overall standards of corporate governance,” wrote Moody’s Frank Henson. “There’s many ways it could have been handled, for example, if he had stepped aside while it was being investigated and reviewed by the board. But it wasn’t handled in that fashion. … The ongoing practice of appointing family members to C-suite positions in the company also creates governance risk relating to conflicts of interest and independence.”
Tyson Foods declined to comment for this story, citing the quiet period before announcing earnings. “The company and a committee of independent directors of the Tyson board have separately reviewed the recent incident,” the company said previously. “This review process was conducted pursuant to the company’s internal procedures, best practices in corporate governance, and resulted in actions consistent with those procedures. The board supports Mr. Tyson and has continued confidence in his ability to lead Tyson Foods as CFO.”
Not everyone is as concerned as Moody’s about John R. Tyson’s arrest and the company’s response. Barclays’ Benjamin Theurer said it had no impact on how much he estimates Tyson Foods to be worth. “It’s unfortunate,” Theurer told Forbes. “You don’t want to make those kinds of headlines. But it’s not something that has come up again from investors as a point of concern. From a governance perspective, it can be called a yellow flag.”
The company goes back to John R. Tyson’s great-grandfather, John W. Tyson, who in 1931 was six years younger than John R. is now when he moved his wife and one-year-old son, Don, to Springdale, Arkansas, with half a load of hay and a nickel in his pocket. From there, John W. Tyson sold chickens to customers in Kansas City, St. Louis and Chicago. The Tysons expanded into raising their own poultry during World War II. That’s when demand began to soar because pork and beef were rationed and poultry was not. Tyson’s first plant opened in 1958. By 1963, the company was publicly traded.
“Without bold ambition and an eye for the future, we can’t be successful.”
Tyson Foods is still controlled by the Tyson family. They maintain their stake — 20% of the common stock — through a limited partnership. A dual-class voting structure insulates the family’s shares and gives the LP roughly 70% of the company’s voting rights. It’s the biggest part of the Tyson family’s fortune. John R. Tyson’s father, company chairman John H. Tyson, is worth $3 billion.
When John H. Tyson took over for his father Don in 2000, investors questioned whether the unproven grandson of the founder could lead such a large and important company. Prior to his appointment, John H. Tyson struggled with an addiction to alcohol. He said he stopped drinking after his beloved uncle Randal, also a heavy drinker, died in 1986. According to a 2004 Forbes profile, John H. Tyson said he “just got tired” and credited his recovery with “God’s grace that gave me a chance to be clean.”
Now, as the baton of company leadership draws ever closer to the next generation, the spotlight grows brighter on John R. Tyson. As he told Forbes in a 2020 interview that has never been published: “This company has been in my family for multiple generations. Without bold ambition and an eye for the future, we can’t be successful.”