Outgoing Tyson Foods CEO Donnie Smith/Twitter
For all the talk of technology making human beings obsolete, we live in a talent-driven business environment, and nowhere is that more true than at the top of the corporate hierarchy. Recent studies of CEO impact have found that the competence of the chief executive makes a huge difference to business performance and shareholder value, which is why directors are quicker than ever to fire underperforming CEOs and why mergers and acquisitions aimed at “acqui-hiring” the CEO of the acquired company are becoming more common.
The latest reminder of the outsized value of the CEO came with Tyson Foods’ announcement last week that its CEO Donnie Smith would step down at the end of this year. Tyson’s stock had quadrupled during Smith’s seven-year stint at the helm, Geoff Colvin and Ryan Derousseau noted at Fortune, and news of his departure contributed to an instant $3.4 billion decline in the company’s market value.
“The larger point,” Colvin and Derousseau explain, “is that this type of value-jarring scenario is playing out more often, and it didn’t used to happen.” They point to some other recent examples of high-level personnel changes that led to sudden shifts in the market:
On Tuesday, the US Supreme Court upheld a lower court’s decision allowing over 3,000 of employees at a Tyson pork processing plant in Iowa to recover overtime pay for the time they spent putting on and taking off protective gear. As the Washington Post’s Robert Barnes explains, the 6-2 decision
rejected Tyson’s contention that [the workers] should not have been able to use statistical averages to prove that they were not paid what they were due. The court did not rule on a second argument offered by Tyson, that some workers who had not been underpaid might benefit from the award. …
[Tyson had] claimed that the thousands of current and former plant workers who brought the suit did not have enough similarities in their duties to be able to use statistical averages. The workers sought to prove that they had not been compensated for overtime accumulated “donning and doffing” protective gear and doing other tasks necessary for their work.
Sachin Pandya at Workplace Prof Blog details how the plaintiffs made their case:
For [Fair Labor Standards Act] overtime claims, a plaintiff-employee has to prove that he or she had worked for over 40 hours in a work week. But, because Tyson hadn’t kept proper records of employee donning and doffing time, the plaintiffs had no individualized work time records to prove their total hours worked. So, at trial, the plaintiffs submitted “representative evidence”—key among which was study in which an expert observed a sample of 744 employees, counted donning and doffing times for each, and calculated averages by the sampled employees’ departments (cut and retrim departments: 18 minutes; kill department: 21.25 minutes). With these averages, along with individual work time records that Tyson had kept, another expert concluded that all but 212 employees in the Rule 23 certified class worked more than 40 hours, and thus might be owed overtime pay. Tyson argued against this evidence to the jury, but the jury awarded about $2.9 million in unpaid wages.
In SCOTUSblog court watcher Lyle Denniston’s opinion, the decision created a small opening for class action lawsuits after the Court spent five years building a “quite sturdy barrier” against them: