Study shows how factory farms skirt liability

October 30, 2013

Staff Report

A study published in the peer-reviewed journal Rural Sociology documents the pollution and financial liability displaced on rural communities by factory farms through Limited Liability Corporations (LLCs). The study traces the rise of a business organizational strategy that Midwest industrial livestock producers use to sidestep regulatory mechanisms, pollution control and civil liabilities.

Where’s the Farmer? Limiting Risk and Liability in Midwest Industrial Hog Production” explores a growing trend in livestock production where business management firms bring together hog farmers to form LLCs.

In this management system, farmers from different states pool their money together to form massive, concentrated animal feeding operations. The management system uses layers of LLCs to protect these farmer/investors from various risks associated with industrial food production, such as hog diseases, manure pollution, variable markets and civil liabilities.

The authors call these LLCs “folding corporations,” because they form and collapse to protect investors’ assets around the components of swine production. The paper details how these creative LLC structures deflect the farmers’ and the management firm’s risks and liabilities onto rural communities.

Because LLCs limit liability, investors can preserve their profits and hide their names behind corporate veils, even if a costly environmental violation occurs. This provides little incentive for investors to change poor management practices. In addition, because it is difficult to ascertain the identities of LLC investors, they can escape social pressure from the communities in which they operate.

The authors recommend additional research about how widespread these business organizational structures are in the livestock industry on the national level, and urge for reform of state LLC laws so factory farms are required to be responsible for the pollution they create.

The study was authored by Loka Ashwood, sociology Ph.D. candidate at University of Wisconsin, Madison; Danielle Diamond, attorney and research associate at Northern Illinois University (NIU); and Dr. Kendall Thu, department of anthropology chairman and professor at NIU. An online version of the article is available at the Wiley Online Library at http://onlinelibrary.wiley.com/doi/10.1111/ruso.12026/abstract.

From the Oct. 30-Nov. 5, 2013, issue

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