Slaughterhouse Rules: When a Family Business is Too Big to Fail
- The Ownership Observer
- May 20, 2020
- 3 min read
Davos waters once parted for the principals of the world's largest private family businesses as they walked along the Promenade, but Covid-19 has changed the rules of the game for these businesses. Strategy downsides that were always in plain sight, but were perhaps overshadowed by positive financial returns, have now become difficult-to-impossible to ignore.
For U.S. meat and frozen food behemoth Tyson, Covid-19 prompts a pointed question: at what point is a corporation's growth to a certain size, and assumption of a certain percentage of market share evidence of anti-competitive behavior? This is not a legal claim (not yet, at least) but rather a logical or intuitive one, invoking the US Supreme Court's infamous definition of pornography, paraphrased: one knows it when one sees it.
Humanity's niggling collective food conscience Michael Pollan ("Eat food. Not too much. Mostly plants.") is constitutionally opposed to Big Agriculture. But writing for the NY Review of Books, he convincingly explains why the same strategies that vaunted Tyson into the $40+ Billion Annual Revenue Club should now be considered Tyson's prime liabilities. Namely, too-efficient production and too-great market share.
Surefire means of increasing efficiency is the stuff of business school case study fever dreams, but Pollan's arguments are compelling for the gruesomeness of their logic:
"Once pigs reach slaughter weight, there’s not much else you can do with them. You can’t afford to keep feeding them; even if you could, the production lines are designed to accommodate pigs up to a certain size and weight, and no larger. Meanwhile, you’ve got baby pigs entering the process, steadily getting fatter. Much the same is true for the hybrid industrial chickens, which, if allowed to live beyond their allotted six or seven weeks, are susceptible to broken bones and heart problems and quickly become too large to hang on the disassembly line. [...]
Under normal circumstances, the modern hog or chicken is a marvel of brutal efficiency, bred to produce protein at warp speed when given the right food and pharmaceuticals. So are the factories in which they are killed and cut into parts. These innovations have made meat, which for most of human history has been a luxury, a cheap commodity available to just about all Americans."
Step aside, HBS - maximized efficiency and limitless growth is now untenable.
Extrapolating Pollan's argument beyond the specificity of food, one takeaway of Covid-19 is the need to revisit anticompetitive regulation. Pandemic readiness means there must be a cap on just how much market share individual companies are allowed to possess, so that lockdowns in one jurisdiction do not cause an entire industry to evaporate overnight.
Family and company principal John Tyson (not be confused with his son, also John Tyson, who heads up Tyson's CSR division) published an open letter in the NYT that successfully got Trump to declare meat a national necessity -- comically, this "essential" status for meat was afforded more expeditiously than the essential status for ventilators or medical workers' protective gear.
All of this can only work in Tyson's favor, which is the problem with anti-competitive behavior, despite the love of capitalism that leaders of anticompetitive corporations probably profess: the free hand is nonexistent when companies become too big to fail. We're left with a frustrating tautology: Tyson is essential in feeding the U.S. because their expansion, acquisitions, and market share means that they are essential in feeding the US.
Verdict: Pollan wins this round. It's simply too much concentrated ownership.
However, I feel for Tyson. And for Cargill, for that matter. For all the contemporary talk of 'purpose' and stakeholder capitalism, Tyson and Cargill were absolute vanguards in terms of making food widely and cheaply available, to combat hunger, food production, and food supply. That's an incredible legacy. The problem is that knowledge surrounding nutrition has deepened, transnational political economies of food production and consumption has changed, and what was once a winning and laudable corporate purpose -- cheap and widely available food -- is no longer tenable.
What happens when a company's purpose and legacy curdles into what can be considered outright harm?
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