The Virginian-Pilot (Norfolk, VA), September 17, 2006, Sunday

Becoming an industry giant and gaining foes along the way
By JEREMIAH MCWILLIAMS,
The Virginian-Pilot© September 17, 2006 Last updated: 5:48 PM
http://home.hamptonroads.com/stories/story.cfm?story=111201&ran=57311

SMITHFIELD – About four years ago, employees and a few executives of Smithfield Foods Inc. gathered for an environmental awards ceremony in a community center down the street from the company’s palatial headquarters on the Pagan River.
C. Larry Pope, then-president and chief operating officer, laid out the top priorities for the company, which in 2000 had begun its reign as the world’s biggest hog raiser.
“The three most important things in this company are employee safety, environmental safety and food safety,” Dennis Treacy, Smithfield’s vice president of environmental and corporate affairs, recalled Pope saying that day. “The first time he said it, people went out in the parking lot and said, ‘Did you hear what he said?’”
Now it is Pope’s turn to put words into action. On Sept. 1, he took over as chief executive from longtime boss Joseph W. Luter III, inheriting a decentralized company with operations in eight countries and record-setting sales of more than $11.4 billion last fiscal year.
Luter built Smithfield Foods into a formidable competitor in a cyclical, low-margin industry but attracted bitter criticism from labor unions, environmentalists and animal-rights activists along the way. Smithfield has been dogged for years by image-tarnishing legacies, including allegations of environmental degradation and callous treatment of workers and animals.
“When you become the biggest in your industry, you become the target,” Pope said last month at a news conference after the company’s annualshareholders meeting. “Everybody picks at you. … Size brings attention.”
From many indications, Smithfield today is undergoing a corporate makeover. Without admitting fault for past actions, the company is trying to scrub itself clean of its foes’ claims.
Although Smithfield and its critics clash over how deep the changes actually run – and whether they indicate a real improvement in behavior – the company recently has grabbed honors and accolades that would have been difficult to imagine a decade ago.
Consider:
In March, Smithfield popped onto an index of companies touted by the Financial Times newspaper and the London Stock Exchange for maintaining environmental sustainability, building positive relations with stakeholders, upholding human rights, ensuring good labor standards at suppliers and countering bribery.
In May, Smithfield Packing Co., the company’s pork-processing subsidiary, won a certificate from the U.S. Department of Agriculture verifying that hogs slaughtered at the company’s three pork-processing plants were raised on farms that have a system in place to ensure proper treatment and environmental safety.
This year, in response to a string of truck crashes that injured hogs, Murphy-Brown LLC – Smithfield’s hog-raising subsidiary – invested thousands of dollars to respond to incidents more quickly. Employees were retrained on how to handle hurt animals, and how to euthanize them more quickly. Trained veterinarians will be sent to every crash.
Smithfield has opened its books to a degree, disclosing some details of Warsaw, N.C.-based Murphy-Brown’s animal welfare management system.
Smithfield’s environmental management system has won the “ISO 14001” stamp at each of the company’s U.S. hog production and beef processing facilities, except for recent acquisitions. That means the system has been audited independently to ensure it is effective and conforms to guidelines set by the Geneva-based International Organization for Standardization.
Smithfield’s expanded corporate social responsibility report for 2005 lists a $5 million gift from the Smithfield-Luter Foundation to Christopher Newport University in Newport News, as well as a donation of 2.5 million pounds of meat to food banks represented by Chicago-based America’s Second Harvest.
Using evaluations by Smithfield’s peers, Fortune magazine has named the company to its “America’s Most Admired Companies” list four years in a row.
Smithfield is no longer regarded as a backwater operation focused almost exclusively on pork processing.
“They’re making giant steps forward to becoming closer to top-of-mind brand awareness,” said Kenneth Herbst, assistant professor of marketing and a self-described “food psychologist” at The College of William and Mary in Williamsburg. “It’s locally thought of as the top-dollar brand, and it’s the one that really makes your mouth water.”
As the company adds brands and increasingly moves into delis, restaurants and supermarkets, close contact with consumers may be inspiring a savvier and more urgent response to critics.
“Within the United States, livestock production and meat industry growth face a number of challenges, including new or strengthened regulatory oversight,” Smithfield said in its social responsibility report released in April. “Additionally, stakeholders have expressed interest in learning more about what can be done to reduce the industry’s impact on the environment.”
Treacy, who led Virginia’s Department of Environmental Quality before joining Smithfield in 2002, said there were problems in the past.
Five years before he came to the company, for instance, Smithfield was fined $12.6 million for polluting local waterways with hog waste.
“There were some things in the ’90s that were not that pleasant,” Treacy acknowledged.
But, he adds in the next breath, there has been a “fundamental change” in the way Smithfield operates.
“If you walk the halls of Smithfield, you’ll hear a lot of people talking about sales and profits,” he said, “but you’ll also hear a lot of people talking about charitable giving, animal welfare, the environment.”
Carnell York hiked up his pant leg, exposing a jagged scar around his knee where he said a knife slashed him in January 2004 on the processing line of Smithfield’s giant hog plant in Tar Heel, N.C.
He stood outside Richmond’s Cedar Street Baptist Church last month as hundreds of Tar Heel workers and union organizers crammed inside to rally prior to Smithfield Foods’ annual meeting a few miles away.
“If we had a union, they would have treated us better,” York said. He said a plant doctor delayed treating the wound, and that the company fired him a few months later. “The night I got hurt at work, they sent me home. I think they did me wrong.”
Like York’s scar, Smithfield’s reputation has not completely healed from allegations of abuse and aggressive union-busting in the past decade at the 5,500-worker Tar Heel plant. If the United Food and Commercial Workers International Union has its way, the remedy will be strong medicine.
The union organized a nationwide blitz this year – with rallies in Chicago, Washington, Richmond and other cities – to crank up the pressure on Smithfield, hoping to pave the way for a card-check union election at Tar Heel.
Smithfield “will have no choice but to confront the issue,” the Rev. Alfred Reid, pastor of a Baptist church in Prince George County, told hundreds of union supporters inside the church. “Crisis will open the door to negotiation.”
Smithfield added a wrinkle of its own this year by calling for the union to schedule new elections at Tar Heel and a Wilson, N.C., bacon plant. Both plants were subjects of National Labor Relations Board decisions that found the company violated federal labor law. So far, the union has balked, saying the company is not acting in good faith.
“The call for an election, I think, is completely unreasonable because there can’t possibly be a fair election after 10 years of intimidation,” said Lance Compa, a senior lecturer at Cornell University in Ithaca, N.Y., and author of a scathing Human Rights Watch report on the meatpacking industry last year.
The union and outside critics portray Tar Heel as emblematic of a company that would rather drag out the legal process through lengthy appeals than accept a union.
“They’ve fought very hard to make sure the union is not established,” said Richard Hurd, a Cornell professor of industrial and labor relations. “In that kind of environment, workers tend to be extremely cautious.”
Still, about 57 percent of workers in Smithfield Packing Co.’s U.S. pork plants are now unionized with the Teamsters, the food workers or other unions, and executives say they will accept workers’ choices in open union elections.
Workers “get respect – they get dignity,” Luter told shareholders in August. “We have no desire to violate anyone’s human rights.”
What Smithfield does have is a willingness to unleash its legal team to fight damaging allegations, sometimes for years.
As in previous cases that turned against Smithfield, the company has appealed a labor board decision that said Smithfield Packing’s now-defunct internal police illegally abused and bullied cleaning contractors when they walked off the job at Tar Heel in 2003.
Citing executives’ busy schedules, company representatives declined to make Pope, Luter or his son, Joseph W. Luter IV, president of Smithfield Packing Co., available for interviews, except for chats with the elder Luter and Pope after the Aug. 30 annual meeting.
Some changes at Smithfield have come after litigation, spurring claims that the company skirts ethics and the law until it is forced to change.
After launching environmental lawsuits against Murphy-Brown more than five years ago, a New York advocacy group called the Waterkeeper Alliance reached a consent agreement with the company in January.
The deal requires computerized monitoring of sprayers that shoot treated hog waste onto dirt at about 275 North Carolina hog farms, and for sprayers to be shut off when winds reach 15 mph.
Hog farms produce tons of manure and urine, which are flushed from barns into open-air pools before being recycled back into the soil, and environmentalists revile the process for polluting groundwater.
“The fact that we basically had to take some legal action against them is a pretty good indicator,” said Larry Baldwin, who patrols North Carolina’s Neuse River looking for environmental hazards on behalf of the Neuse River Foundation. The group is affiliated with the Waterkeeper Alliance.
“It means they’re not being real cooperative in taking action themselves,” Baldwin said. “They’re not being as environmentally good stewards as they could be.”
Now, the question for Pope and the rest of Smithfield’s top management is whether the company can earn an image as a good neighbor and fair employer while continuing its quest for acquisitions and profit growth.
On Wall Street – where its stock has risen 62 percent in four years – and among many industry observers, there is strong faith that Smithfield’s leadership team will weather the controversies.
“Sometimes when you get too big, you have to cut corners in various parts of your business,” said Herbst of William and Mary. “I don’t see that happening with Smithfield.”
When asked about protests at the company’s annual meeting, Pope said, “I feel very comfortable with the policies we’ve put in place. We have upgraded our attention to developing responses” to deal with environmental and labor concerns, he said.
“Our history in recent years hasn’t been perfect,” Smithfield spokesman Jerry Hostetter said. “But it’s been about as perfect as it can be, with human nature.”
Reach Jeremiah McWilliams at (757) 446-2344 or jeremiah.mcwilliams@pilotonline.com.