That’s some pig at Smithfield…

In nearly 9 years of running footnoted, I don’t think we’ve ever run the same piece of art twice in the same week. But I couldn’t help myself after reading the preliminary proxy that Smithfield Foods (SFD) filed yesterday.

The irony is that while page 50 of the proxy strikes the right tone about related party transactions, noting that “We recognize that transactions between Smithfield and related persons present a potential for actual or perceived conflicts of interest”, the filing then goes on to list what can only be described as a cornucopia of transactions between Smithfield executives, board members, their family members and the company. Think of it, if you will, as a really big pig.

This isn’t the first time that we’ve footnoted Smithfield’s related party transactions. That was back in July 2004, just about a year after I launched footnoted, when we footnoted that various transactions with the family of director Wendell H. Murphy added up to around $41 million.

Fast forward to 2012 and the relationships to Murphy and his extended family continue unabated. In the current filing, we counted around $52 million of related party transactions with various members of business interests owned or controlled by the Murphy family, the largest being a $23.3 million payment to DM Farms of Rose Hill, LLC, which is described as being 100% owned by Murphy’s son, Wendell H. Murphy Jr. To be fair, in 2011, according to last year’s filing, Murphy Jr. received $43.6 million for the same company. But it’s not clear from the filing that this has anything to do with concerns over appearances.

As we noted back in 2004, the senior Murphy, who remains on Smithfield’s board and was once a prominent politician in North Carolina, sold his company to Smithfield in 2000. (The News and Observer won the Pultizer for Public Service for exposing the many laws he passed that favored his business interests during his tenure). As a board member, he made $162K last year, nearly evenly split between cash and stock.

While we realize it’s hard to directly correlate, it struck us as interesting, if nothing else, that Smithfield’s stock is down about 35% since that first post 8 years ago. Is that coincidence? Perhaps. But maybe Smithfield’s directors, including Murphy, should actually do a bit more thinking about the “perceived conflicts.”

Image source: Charlotte’s Web by E.B. White published by Harper Collins, 1952


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