Pilgrim Pride Price Fixing Agreement (October 2020)
Pilgrim Pride Corporation is an American, multinational food company that is currently one of the largest chicken producers in the United States.
The company has recently struck a plea deal with the Department of Justice because of a long-lasting price fixing scandal. Pilgrim Pride is set to paying $110.5 million in penalty for restraining competition in three separate contracts with the U.S. customer. The company's President and CEO, Jayson Penn, and former Vice President, Roger Austin are the two at the company for leading the price fixing efforts. Penn and Austin were also communicating with other big poultry distributors like Tyson Foods to do the same thing. Pilgrim Pride is one of the biggest poultry distributors in the world with 54,000 employees and 36 production facilities in the United States and abroad.
This paper will look at ethical theories like Individualism, Utilitarianism, Kantianism, and Virtue theories. Based on those ethical theories, in each case you can evaluate if Pilgrim Pride could be considered ethical or unethical.
Pilgrim’s Pride Corporation has reached a plea agreement with the U.S. government over charges of price-fixing in the chicken industry. Pilgrim Pride is set to paying $110.5 million in penalty for restraining competition in three separate contracts with the U.S. customer. Price fixing is an agreement written or verbal among competitors that raise, lower or stabilize prices in each market. It also disrupts the basic rule of supply and demand. It gives monopolies like Pilgrim Pride and Tyson Food an edge over smaller competitors. In most cases they impose higher prices on customers, reduce incentives to innovate and raise barriers to entry in the poultry industry. In this case Pilgrim Pride was intentionally raising prices in order to maximize profits. Pilgrim Pride is one of the biggest poultry distributors in the world with 54,000 employees and 36 production facilities in the United States and abroad. Pilgrim Pride says they process one in every five chickens in the U.S. The United States government has charged two of Pilgrim prides highest ranking officials: Pilgrim Prides President and CEO Jayson Penn and former vice president Roger Austin. If found guilty of these charges the two could face up to 10 years in prison and fines up to $1,000,000. The government is charging the two with conspiring to fix prices and bids for broiler chickens from at least 2012 to 2017. Both have pleaded not guilty and are awaiting trial. The charges area among first in a long running investigation into price fixing in the poultry industry. In later weeks, a Federal Grand Jury in Colorado indicted six more employees at different chicken suppliers on price fixing charges as well. All together 10 different employees from major chicken suppliers are being charged for price fixing. One of Pilgrim Prides biggest competitors, Tyson Foods, are also facing charges of price fixing and are cooperating with the United States government as well. Almost 40 lawsuits have been filed by grocers and restaurants and others alleging price fixing in the chicken industry. One lawsuit by Mapleview Farms in New York states the big chicken producers shared information through a third-party data firm and restricted supply by destroying breeder hens on many different occasions. In result because of the lawsuits against these chicken industry giants, Tyson Foods dropped 4% and Pilgrim Prides 12%.
Pilgrim Pride poultry factory
A stakeholder of the price fixing scandal is Pilgrim Pride’s investors. The reason the investors are stakeholders is because they invested in the company’s stock and because of the scandal the stock has dropped. Some owners of Pilgrim Pride stock that are negatively being affected because of the price fixing scandal are The Vanguard Group, LSV Asset Management, Blackrock Funds Advisor, etc. Another stakeholder in the company’s scandal are the customers. They are stakeholders because with Pilgrim Pride and other big poultry companies intentionally raising prices of chicken to benefit themselves it is costing the customer more money out of their pocket. Another stakeholder in the case are the suppliers of Pilgrim Pride products. With Pilgrim Pride raising the prices they are spending more money on the product and that affects the price in the store. The last stakeholder of the scandal was Pilgrim Pride as a company. The CEO and Vice President at Pilgrim Pride lost their jobs because of this price fixing scandal. The company’s image is also affected because they can be seen as a company that doesn’t care about their customers and suppliers of their product and only care about making the most money possible.
Pilgrim Pride CEO and President Jayson Penn
There are two different theories of individualism. One was founded by Milton Friedman. He believed that Individualists main goal is that a business’s only goal is to maximize direct profit. Friedman also believed that giving away goods and services is considered stealing from the business. There were also some objections to Friedman’s theory. One was that investors might not invest in a company that might lack in a socially responsible workplace. Another objection was that the motivation of customers and employees to work for a socially responsible business, working for a cause, might be lower to another business that isn’t run like Friedman. Then, there was Machan’s theory about individualism. He also believed that a business direct goal was to profit but that goal might be met by indirect goals not aimed at profiting. He knew that businesspeople have different goals in mind, but you had to keep in mind the bottom line.
I would that Pilgrim Pride followed Milton Friedman’s approach of individualism. When Pilgrim Pride was intentionally destroying chicken breeder hens, they were also raising the prices of their products. They wanted it to look like the quantity of poultry was getting more scares and would give them a good reason to raise prices. In their cases they were intentionally destroying their chicken breeder hens in order to raise prices and maximize their profit. They didn’t care about if investors thought they were morally responsible, and they didn’t care if they were working for a cause. There were also no indirect goals that were not aimed at profiting. Pilgrim Pride just wanted to make a profit and stopped at nothing in order to do so.
Utilitarianism is all about maximizing overall happiness in a situation. Utilitarianist also believe that good and bad acts are determined by consequences. Utilitarianism is a complete theory because it maximizes happiness in yourself and others but also has some self-sacrifices. With utilitarianism comes the principle of utility: We ought to bring about happiness and pleasure in all human beings capable of feeling it. All things should matter and your happiness and others should be weighed in when deciding. There were also some objections to utilitarianism. One being happiness is difficult to measure. Another one is that individual freedoms matter too, not just overall happiness. Lastly, that there are some things that we should do that don’t promote overall happiness. Utilitarianism is a complete theory, but it really is hard to make everyone happy with your choices.
Pilgrim Pride wasn’t really maximizing overall happiness but in some way they were. Pilgrim Pride was not making their customers happy because the prices were going up. They were also not maximizing happiness because the government did not like how they were intentionally starting a monopoly in the poultry industry. They were also not maximizing happiness with the chicken because they were intentionally destroying breeder hens. One could argue, in most cases, because of price fixing the consumer is getting a better product. With Pilgrim Pride destroying breeder hens they are freeing up much needed room in these giant chicken coupes that are already stuffed with chickens. This ultimately could lead to a healthier chicken and a better product for the consumer of Pilgrim Pride products. So, to maximize happiness is tough here because with the price fixing the prices were going up and that was upsetting the government and the chicken because they were intentionally destroying breeder hens. But one could argue that because they were price fixing the chickens that were in the coupes have a happier and healthier life and that can lead to a better product. Either way, to maximize happiness in this case is hard because I don’t think all parties can be happy.
The basic principles of Kantianism are that you should ask rationally. Don’t act inconsistently in your own actions or consider yourself exempt from the rules. You should also allow and help people to make rational decisions. You should respect people, their autonomy, and individual needs and differences. Lastly, be motivated to do what is right because it is right. With Kantianism comes the formula of humanity. The formula of humanity states that you should act in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a mere means. What it means by saying,” mere means,” is that you should never use someone for just the benefit of yourself.
In Pilgrim Pride’s cases they weren’t following Kantianism at all. They were using the customers as a means and not an end. With the price fixing scandal, the prices of Pilgrims Pride products went up. Poultry is a relatively cheap source of protein compared to steak, fish, or lamb but not anymore because of the price fixing scandal. They thought that raising the prices a little would not matter because it still was a cheap protein compared to others, but it was the money the customer could have used on something else. Pilgrim Pride was also using the grocery stores as a mere means. Because Pilgrim Pride was raising their prices it also led to the grocery stores rising their prices so they could still make a profit as well. With the prices rising in the store the customers were probably mad because they once got the same product at a cheaper price and at the same store. So, the grocery stores that supplied the Pilgrim Pride products could have lost customers because of the increasing prices due to the price fixing.
According to Alexandre Harvard in order to be a virtuous leader there are certain virtues you must have in order to be successful. These are known as the cardinal virtues. The first cardinal virtue is Prudence. Prudence is the ability to discern the appropriate course of action to be taken in each situation at the appropriate time. The next one is Fortitude and that is the ability to confront fear and uncertainty. The third one is Temperance. Temperance is known as having control and being able to restrain. Next, is Justice and that is being fair. Lastly, most may add is honesty and that is the ability to tell the truth and never lie. All these virtues must be followed together, like a hinge, without one you can’t be a virtuous leader. With these cardinal virtues one must also be magnanimous. This is the idea of being generous and always looking out for everyone.
I don’t think Jayson Penn ever followed any of these virtues when he was the President and CEO at Pilgrim Pride and that eventually led to his downfall. In order to be prudent, you must do the right thing and by purposely destroying breeder hens is not doing the right thing. He wanted to make it look like the supply of poultry was going down so the company could charge more and maximize profits at all costs. He even conspired with other companies to do the same in order to gradually increase prices and affect the whole poultry market. If Penn was following the temperance rule, he would have restrained to fixing the prices and left them how they were. Instead, he wanted the company to make more money and change the prices in the poultry market. Penn wasn’t following justice and the ability to be fair. He didn’t care how much his products cost because he knew that Pilgrim Pride was one of the largest poultry suppliers in the world. He wanted to make as much money he could and stopped at no means to do so. I would say it is safe to say that Jayson Penn never followed any of these virtues when he was at Pilgrim Pride and these contributed to his downfall as a leader.
In this case, with Pilgrim Pride price fixing I would say that the company was being unethical. I say that because they were intentionally raising the prices of their products but also throughout the poultry market conspiring with other companies to follow. That is all they wanted to do is maximize their profits. One could argue that with price fixing the customer is getting a better product but there are ethical ways of being able to produce a better product. Pilgrim Pride could make the coupes bigger and the chickens would be healthier and of better quality and then they could charge more for their product. But instead they destroyed breeder hens to make chicken more scares and ultimately charge more money. So, with all this said, Pilgrim Pride was not being ethical by fixing the prices in the poultry industry.
Pilgrim Pride has recently been accused of price fixing in the poultry industry. There were intentionally destroying breeder hens to be able to charge more for their products. Pilgrim Pride was also having talks with other poultry giants like Tyson Foods to do the same. The company did let go of the President and Vice President that were behind this so they can start fresh with new management. They could fix this problem by apologizing to the grocery stores that supplied their product and the customer. For the customer, they should put a coupon on their products so they can save some money on Pilgrim Pride products after being charged more in the past. For the grocery store, Pilgrim Pride should charge less for the stores to buy their products because of how the price fixing affected the image of their store. They should give the grocery stores a good deal after being charged more to supply Pilgrim Pride products in the store. In order to maximize profits they can have fair prices compared to competitors and that can raise sales. Pilgrim Pride should be known as striving to be the best managed and respected company in the poultry industry by valuing the customers and suppliers of their products. This differs from their mission statement because it talks about being the highest quality poultry distributor in the world but doesn’t talk about valuing their customers and suppliers. The new mission statement makes sure the company is being managed properly and ensures that they value the customers and suppliers. The core values of the Pilgrim pride should be customer satisfaction, supplier satisfaction, and integrity. To ensure ethical monitoring the company could meet with the employees and change policies to ensure that the destruction of the breeder hens was wrong and make sure it doesn’t happen again. Pilgrim Pride should now be marketed as the cheapest and highest quality product in the poultry industry. They should make prices lower but still be able to make money and ensure happiness from their suppliers and customers.
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