Monday, September 30, 2024

Boar’s Head and the price of deregulation

Plus: B-schools and the US election

The scandal at Boar's Head, an American deli meat brand name, has been unfolding for months after a deadly listeria outbreak. As Businessweek's Amanda Mull writes today, it's part of a longer tail of an industry fighting successfully against regulations. Maybe a bit too successfully, it turns out. Plus: What international MBA students are thinking about the Harris-Trump presidential race, how German retirees were stung in a shipping container fraud and why the EV and battery industries are a big draw for vets.

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There are many theories of business, but a very popular one goes something like this: Government regulation acts mostly as a restrictor plate on the speed of progress and profit, and only when industries remove that burden can the companies within them reach their full potential. Relatively few extremists want no regulation at all, but the home renovations and European vacations of innumerable lobbyists have been funded by pursuing the general belief that less is more.

As with most wrongheaded-but-durable ideas, there's a kernel of truth in there somewhere; poorly reasoned or executed governance can screw things up for companies and the public alike. But any business that would prefer to do more self-governing should be careful what it wishes for. The result is often the business equivalent of stepping on a rake.

This summer, Boar's Head Provisions Co. entered the recent pantheon of companies, alongside Boeing Co. and Abbott Laboratories, that could've used a little more oversight for their own good. The deli food giant spent more than a century building itself into a nationwide leader across multiple product categories only to torch its reputation over the past few months with tainted deli meat. A listeria outbreak that the Centers for Disease Control and Prevention has linked to unsanitary conditions in the company's Jarratt, Virginia, plant has killed 10 people and sickened far more, prompting multiple lawsuits and a promised congressional investigation. Boar's Head has announced it will close the affected plant, wiping out more than 200 jobs in a small town that depended on it, according to the New York Times.

Boar's Head started recalling deli meat in July. Photographer: Justin Sullivan/Getty Images

Boar's Head is a private company with what seems to be an intensely insular culture—a recent Forbes report found that it's not even clear who the chief executive is months into the listeria scandal—so it's difficult to know its opinions on regulation. The meat processing industry, however, has made its preferences clear. Time and again, industrial meat processors have urged federal officials to let them take more liberties and enforce more of their own safety standards, and, thanks to a federal food-safety apparatus that a 2021 ProPublica investigation described as "baffling and largely toothless," the industry has prevailed in many of those fights. In 2019, for example, the Trump administration relaxed safety standards at pork slaughterhouses to allow them to do more self-policing and speed up their lines—a policy that, when tried in pork plants for three years, led to almost twice as many violations that carry an elevated risk of disease transmission, according to the watchdog group Food & Water Watch.

Department of Agriculture inspectors were present in the Boar's Head plant at the center of the outbreak, and they documented numerous red flags, including the repeated presence of bugs, mold and mildew, according to documents first obtained by CBS News. Even so, there's no evidence that any enforcement actions were taken by the agency to make Boar's Head address those issues, and internal documents released by the USDA show that the company regarded listeria outbreaks as "low risk." The company also lacked written standards on how frequently employees should do things like change soiled aprons and gloves.

The investigation into what, exactly, went wrong at Boar's Head is ongoing, but quite a few of the problems described so far are what happen when companies of many types cut corners. It's the kind of short-term thinking that you can do when you're not afraid of the feds swooping in—such as cutting costs on supplies, sanitation and experienced labor until the guardrails are so low that the whole operation eventually careens into a ditch, taking innocent members of the public with it. What happens to these companies next—lawsuits, fines, settlements, loss of public trust—is almost always far, far more expensive than it would've been to run a marginally safer operation to begin with. Regulate now, or pay later.

In Brief

MBA Candidates Aren't Sweating the Election

For many Americans, November's election is a do-or-die moment. Partisans on both sides fear for the country's future come Jan. 20. Do you know who's not worrying? Would-be foreign students at US business schools. An ongoing survey, published today, of prospective international applicants by the Graduate Management Admission Council finds that, so far, almost three-quarters of respondents say the outcome in the presidential race will have no bearing on their decision to pursue graduate business degrees in the US.

That's quite a turnabout from the last two presidential elections. In the months after Donald Trump won in 2016, and again in 2018, almost 40% of respondents told GMAC they were less likely to seek a graduate business degree in the US. In late 2020 and 2021, after Joe Biden defeated Trump, the sentiment had almost exactly reversed—39% now said they were more likely to apply to a US business school. About half (just under in the Trump years and just over after Biden's election) said the recent election would not affect their decision. Today, 16% of respondents say the election will make them more likely to come to the US; 13% say it will make them less likely. (The question itself doesn't assume one outcome or the other, which suggests that slightly more of these prospective students expect a favorable outcome than think their candidate will lose.)

The report suggests that applicants might be thinking more about policy than politics, and when it comes to handing out student visas, the Trump and Biden approaches have been remarkably similar.

Robb Mandelbaum has the numbers here: The Presidential Election Isn't Stopping International Students From Coming to America

Unraveling a €3 Billion Shipping Company Fraud

Illustration: Maxime Mouysset for Bloomberg Businessweek

The Munich suburb of Grünwald is home to some of the richest people in Germany—old money sprinkled with a few corporate chieftains and sports stars. The place oozes respectability and discretion, with residents who appreciate neighbors who don't ask too many questions.

It was a perfect home for P&R Containers. The company—ostensibly in the shipping business—occupies a low-slung building with oversize windows on a winding street of doctors' offices, insurance agents and real estate brokers. It's one of the smallest structures in the area, and behind the glass doors there's little ostentation, just plain rooms with gray carpets and white walls.

That appearance of anonymity and humility allowed P&R to carry out one of Germany's biggest-ever scams. The company presented itself as a broker of shipping containers—those 20- and 40-foot steel boxes stacked up on ships or strapped atop trucks and trains that carry everything from socks to sofas, ramen to refrigerators. But over the years, P&R slowly shifted away from containers to the more profitable business of simply ripping people off.

At its peak in 2018, P&R claimed to control 1.6 million containers, which it sold to retail customers and then leased on their behalf to shipping companies. In reality it owned only about 600,000 of them. The rest were fiction—which would soon shock the company's tens of thousands of investors.

Giulia Morpurgo and Laura Malsch unravel the whole tale: The Great €3 Billion Shipping Container Heist

From War Zones to the Battery Belt

Illustration: Kimberly Elliot for Bloomberg Businessweek

America's biggest factory boom in generations is running up against a shortage of skilled workers. As manufacturers and technical colleges race to train employees for cleantech plants sprouting up across the country, one group is emerging to help fill the skills gap: military veterans.

Former Marines, Army avionics engineers and Navy technicians once deployed in combat zones including Iraq and Afghanistan are finding second careers at factories making electric vehicles, batteries and solar cells. They're combining old-fashioned military discipline with new skills honed during active duty such as operating robots and drones.

"Mission-focused, adaptable, strong work ethic, ability to work under pressure and overcome adversity," says Toyota Motor Corp.'s Jamie Hall, who oversees the hiring of thousands of workers at a new EV battery plant in North Carolina. "These folks have a lot of training and are prepared for those things." The facility, some 70 miles northwest of the US's biggest military base, Fort Liberty, has already hired about 90 vets.

Saijel Kishan writes about the skills and discipline employers want: Military Veterans Help Plug Worker Shortages at EV, Battery Plants Sprouting Up in the US

Not-So-Smart Money

8.8% 
That's the annualized rate of return of Harvard University's endowment over the past 20 years—lagging 60% of university funds over $5 billion. Its money managers underperformed after changing personnel and strategies at the worst times.

Tipping Points

"Republicans will be reluctant to tear out the IRA root and branch. There will be a lot of projects in Republican districts they do not want to uproot."
James Lucier
Managing director at research group Capital Alpha Partners, referring to the Inflation Reduction Act
For the first time, the entire US government has taken up the fight against climate change. Here's a guide to what a second Trump White House can—and can't—do to the American effort to slow global warming.

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