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The Recipe for Contaminated Beef? Shoddy Governance

Posted: 10/03/2012 12:35 pm

I interviewed an independent director of Canadian food retailer Loblaws about risk and he told me the most important risk for Loblaws that could cause a "run on the bank" (his words) was food safety. Food safety was front and centre in his mind, and each of the other independent directors and management. It seems the management of XL Foods Inc., which is owned by Nilsson Brothers Inc., has not figured this out. "Governance" does not even appear on their sparse website. Safety does, in a general way. Neither company appears to have any independent directors.

Contrast this with the other major beef processor in Canada, Cargill Ltd., which is owned by Cargill, Inc. in the U.S. See Cargill's commitment to food safety; its "ethics open line" here; its core competencies that include supply chain and risk management; and that its board has six independent directors and five managers, according to Wikipedia. (Its 2008 accountability report stated a third of the board were independent directors.)

Cargill claims to be the largest private company in the U.S. in terms of revenue. Although private companies like Nilsson Brothers and Cargill are not required to have independent directors, forward-thinking ones do. See McCain Foods here. Independent directors bring objectivity and an external perspective into the boardroom. They are honest brokers to keep an eye on management. A good independent board will not prevent a disaster but almost always will lessen its likelihood.

SLIDESHOW: KINDS OF FOOD POISONING YOU SHOULD KNOW

According to the Mayo Clinic, the most common way to acquire an E. coli infection is by eating contaminated food such as ground beef: "When cattle are slaughtered and processed, E. coli bacteria in their intestines can get on the meat. Ground beef combines meat from many different animals, increasing the risk of contamination."

The way you mitigate food safety risk is through internal controls, including segregation of duties, restricted areas, approval, records and reconciliations -- and a culture of food safety and not cutting corners. Management is inherently conflicted in assuring such controls, and internal controls cost money. This is the reason for government inspectors and, most importantly, a competent and independent board of directors to approve the control regime to begin with.

I am heading to Calgary next week to give speeches to the directors of Livestock Identification Services Ltd., as well directors of a few additional beef industry groups and one being a newly formed national beef agency called Canada Beef Inc., on internal controls and risk. I have given speeches to farmers in the U.S. and am going again to Colorado in November to talk to CEOs and director-farmers on the latest trends in corporate governance, risk management and internal controls. Good agri-businesses take governance very seriously.

Risk management and internal controls are not profit-producing activities per se. No one likes to be controlled, least of which entrepreneurial employees. However, ask yourself if defective internal controls are worth the price, in terms of reputation and financial loss. Do you think XL Foods has taken a financial and reputational hit because of the tainted beef? What about the farmers coping with a price decline? What about Maple Leaf Foods? Most importantly, what about the health and safety of customers? It can indeed be a run on the bank if consumers don't have confidence, and it can get worse unless governance checks are put in place.

See the long list of beef recalled from the Canadian Food Inspection Agency, and the update from the USDA Food Safety and Inspection Service. Recall that the American inspectors detected the tainted beef before Canadian inspectors did.

Rather than bullying the federal agency to re-open XL Foods, the premier of Alberta, Alison Redford, should insist that food safety for all Canadians (and consumers in America and other countries too) is number one. Then, and only then, should XL Foods be re-opened.

Tainted beef from Alberta seems to be a pattern. And the Prime Minister should reform the governance of the Canadian Food Inspection Agency to require independent directors and an independent chair (it appears not to have either on its website) like many other federal or provincial agencies. Maybe it's also time that some private companies that affect a broad swath of the population should have a requirement for independent directors too.

KINDS OF FOOD POISONING YOU SHOULD KNOW


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  • Campylobacter Enteritis

    A common bacterial infection producing severe gastrointestinal upset that can hang around as long as two weeks. It's rarely fatal in healthy people. <strong>The culprits: </strong>Improperly slaughtered or processed meat not thoroughly cooked, contaminated vegetables, milk or water. Pets can also shed the bacteria through their "business." <strong>What it feels like: </strong>You'd pay closer attention to the flulike symptoms (fever, aches and pains) if you weren't running to the bathroom every 15 minutes of your life. <strong>Maybe you shouldn't have: </strong>Plucked that mass-processed pack of pork chops out of the "manager's special" bin. Also, if you really need to be told, leave seagulls alone. They're neither friendly nor tasty and are known to harbor higher concentrations of the bacteria. Common sense and decent kitchen cleanliness should protect you from needless downfall. <strong>Related: <a href="http://www.foodrepublic.com/2011/08/31/are-these-5-foods-trying-kill-you?utm_source=huffingtonpost.com&utm_medium=partner&utm_campaign=food-poisoning" target="_hplink">Are These 5 Foods Trying To Kill You?</a></strong> <em>Photo via Flickr user <a href="http://www.flickr.com/photos/stuartwebster/5829527553/" target="_hplink">StuartWebster</a></em>

  • Cholera

    Contrary to what literature might have you believe, there will be no love in the time of cholera, only misery, woe and lots of diarrhea. <strong>The culprits:</strong> Contaminated water and eating raw or undercooked seafood that was hanging out in that water. <strong>What it feels like:</strong> Being slowly dried in a dehydrator that looks surprisingly like your bathroom while your abdomen is squeezed by a giant godlike fist. You might just want to set up shop in there for a spell, the toxin in the cholera bacteria causes any water in your body to "release." Replenish as you might, it likely won't stay in there very long. Keep at it diligently, though, and you'll be fine in about a week. <strong>Maybe you shouldn't have:</strong> Splashed around in a stagnant portion of the Meekong Delta for so long, or eaten those Mexican oysters with quite as much gusto. <em>Photo via Flickr user <a href="http://www.flickr.com/photos/philosophygeek/3964899327/" target="_hplink">philosophygeek</a></em>

  • E. Coli Enteritis

    The black sheep of the food poisoning world, E. coli's the one with a strain that'll actually kill you regardless of treatment attempts. How subversive. <strong>The culprits</strong>: Escherichia coli, or E. for short, has one incredibly powerful strain: O157:H7, although other related strains can cause infection as well. This bacterium is found in mass-processed ground beef and on vegetables that were improperly cleaned or handled by contaminated fingers. <strong>What it feels like:</strong> You've been stabbed in the colon, which would explain the crippling cramps and other things that might happen if one were actually stabbed in the colon, including blood. Not that there's a "better" food poisoning to get, but this is one you really want to avoid. <strong>Maybe you shouldn't have:</strong> Eaten that rare burger of questionable origin while chugging raw milk in that crazy crowded public pool, all of which have been known to harbor the bacteria. <strong>Related: <a href="http://www.foodrepublic.com/2011/06/06/update-new-e-coli-culprit-europe?utm_source=huffingtonpost.com&utm_medium=partner&utm_campaign=food-poisoning" target="_hplink">Update: New E. Coli Culprit In Europe</a></strong> <em>Photo via Flickr user <a href="http://www.flickr.com/photos/khawkins04/5969315133/" target="_hplink">khawkins04</a></em>

  • Ciguatera (Fish Poisoning)

    An incurable disease caused by eating fish contaminated by coral algae toxins. A real doozy, with an estimated 50,000 cases each year. <strong>The culprits:</strong> Ciguatera is limited to fish of tropical origin. It's impossible to detect by seafood processors, and can't be killed by cooking or freezing. Live in fear of grouper, or continue on with your life with relatively minimal risk. <strong>What it feels like:</strong> At first, typical food poisoning symptoms may present, but the bigger problem with ciguatera is its severe and often irreversible neurological effects. These can include trouble sensing hot or cold, tingling "phantom limb" pain in the extremities and other symptoms that may be confused with anything from multiple sclerosis to heart failure. <strong>Maybe you shouldn't have: </strong>Hit that fried "mystery tropical fish" eating contest at that Margaritaville in that tropical location with your buddies. To minimize your risk of catching this seriously unfun bug, make sure you know what your fish is and if possible, where it came from. Larger fish from shallower waters in a tropical environment are your worst bet. <strong>Related: <a href="http://www.foodrepublic.com/2012/04/06/trouble-brewing-fda-and-sushi?utm_source=huffingtonpost.com&utm_medium=partner&utm_campaign=food-poisoning" target="_hplink">Trouble Brewing For The FDA. And, Sushi.</a> </strong> <em>Photo via Flickr user <a href="http://www.flickr.com/photos/alonsoinostrosa/4055075930/" target="_hplink">alonso_inostrosa</a></em>

  • Listeria

    The range of listeria infection, or listeriosis, lands you somewhere between asymptomatic and dead and can occur from eating or drinking basically anything that was grown, raised or milked. <strong>The culprits:</strong> Raw or improperly pasteurized dairy products, vegetables grown in contaminated soil (yup, it can live in soil), preserved and smoked meats (can be identified by a slippery or slimy film), canned and raw seafood and fresh fruit. <strong>What it feels like:</strong> A bad flu, although more serious complications like meningitis can occur in people with weakened immune systems, as well as in young children, pregnant women and the elderly. <strong>Maybe you shouldn't have:</strong> Eaten all those root vegetables straight from the ground without washing them right after milking your cow. I mean a hippie farmer's life is great, unless your land is rife with listeria. <em>Photo via Flickr user <a href="http://www.flickr.com/photos/9229859@N02/2575380447/" target="_hplink">bucklava</a></em>

  • Staphylococcus

    This is the picnic food poisoning everyone warns you about, especially you, dude who brought the mayo-choked potato salad (<a href="http://www.foodrepublic.com/2012/02/10/potato-salad-horseradish-recipe ?utm_source=huffingtonpost.com&utm_medium=partner&utm_campaign=food-poisoning" target="_hplink">try this one instead</a>). <strong>The culprits:</strong> The bacteria releases its toxins at the comfy incubator that is room temperature food, which gives staph food poisoning its signature cookout-ruining reputation. The worst part? Reheating contaminated food won't kill it off. Actually the worst part is the symptoms. <strong>What it feels like:</strong> Explosive, and not in a romantic feelings kind of way. Within an hour of ingesting contaminated food, both ends will be entirely occupied for up to a day. The good news is, once it's out, it's out and you can get right back to the picnic. Oh wait, it's over. <strong>Maybe you shouldn't have:</strong> Microwaved that leftover potato salad thinking no bug could possibly survive the ordeal. <em>Photo via Flickr user <a href="http://www.flickr.com/photos/stuart_spivack/274140418/" target="_hplink">stu_spivack</a></em>

  • Salmonella

    The bacteria that causes salmonellosis, or salmonella poisoning, has a serious reputation among poultry and their handlers, and BOY does it love hanging out on the stretches of counter you missed with the sanitizer. <strong>The culprits:</strong> Although eggs, processed chicken parts and other raw meat are particularly good at spreading the bacteria, pet reptiles and rodents are also carriers. Wash everything any dead or live animal comes in contact with and maybe don't allow live animals in the kitchen while you're cooking, period. <strong>What it feels like:</strong> Your small intestine betraying you entirely. Expect a week or so of your typical diarrhea, abdominal cramps and possibly a fever. <strong>Maybe you shouldn't have:</strong> Attempted your own Japanese-style chicken breast sashimi or let Shelly the turtle roam around willy-nilly on the cutting board. Especially before slicing said chicken sashimi. <em>Photo via Flickr user <a href="http://www.flickr.com/photos/vseehua/518875309/" target="_hplink">Casper Jen</a></em>

  • Shigellosis

    Similar to salmonella but yet so very different is shigella, which attacks the large intestine rather than the small. <strong>The culprit: </strong>You're going to love this -- human waste. While plenty of food-borne illness can be spread this way, particularly by catching a ride in food or water, many cases of shigellosis can be directly attributed to contact with... well, you know. It can also be resistant to antibiotics, so definitely practice safe sewage-wading. <strong>What it feels like: </strong>Salmonella, only with more blood. <strong>Maybe you shouldn't have:</strong> Taken on that blackout drunken dare to see what's really under that manhole by the creek, then gone straight to In-N Out. Just maybe. We live in a developed nation, you almost have to try to get this one. It's Darwinism, people. <em>Photo via Flickr user <a href="http://www.flickr.com/photos/nathanreading/6141237661/" target="_hplink">Nathan Reading</a></em>

 

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