Is Tyson turning over a new leaf?

January 24, 2008

images-2-21-49-18.jpegCranky markets make for cranky people, but life as we know it must continue. And here at Footnoted, life as we know it often includes posting about Tyson Foods (TSN), one of our frequent flyers (last footnoted by Michelle in November).

Friday brought the news that former Chairman/CEO Don Tyson and other insiders had settled the 2-year-old shareholder lawsuit over stock option springloading and other not-so-kosher practices at Tyson Foods. The D&O Diary blog has a nice write-up on the stock option stuff; here I’ll focus on parts of the settlement that are getting less attention.

While “vehemently denying any wrongdoing whatsoever,” Don Tyson and Tyson Limited Partnership agreed to fork over $4.5M plus at least another $1M for the plaintiffs’ legal fees. And Tyson Foods agreed to start doing a few things differently, at least for the next 7 years:

– Refreshingly, new business dealings between the company and the Tyson clan will now be a no-no. Exceptions can be made only if the board’s independent governance committee decides (unanimously) that it’s impossible to find “reasonably equivalent transactions on reasonably equivalent terms” with an unrelated party, or there are other “special or exigent circumstances.” And if they allow any related transactions, they’ll have to announce that in the proxy. (Some firms take the view that business deals with insiders are A-OK as long as the terms are similar to what they’d be with an outsider. The Tyson settlement sets a much tougher standard, and the firm will need a darn good reason to engage in corporate incest.)

– The company has to pay either KPMG or Deloitte to help it do a better job of disclosing any related party transactions.

– Tyson’s board must establish an independent nominating committee, appoint a lead independent director, and replace one of the 5 current inside directors with an independent one.

– And my personal favorite: Each year, around a month after the annual meeting, CEO Richard Bond and the lead independent director must invite the company’s largest shareholders to a kaffeeklatsch and listen politely while they complain.

The settlement awaits court approval.

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