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UPDATE 2-Tyson Foods urged to launch external review of finance chief's arrest

(New throughout, adds comments from corporate governance experts)

By Tom Polansek

CHICAGO, Nov 14 (Reuters) - Tyson Foods Inc should hire an external firm to lead a review into Chief Financial Officer John R. Tyson's recent arrest, corporate governance experts said on Monday, after the company announced its own board members would oversee the matter.

Tyson, the great-grandson of the meat company's founder, apologized on a quarterly earnings call for his Nov. 6 arrest for criminal trespassing and public intoxication in Fayetteville, Arkansas.

He is also the son of the company's board chairman, John H. Tyson.

John R. Tyson's arrest came as Tyson Foods is grappling with rising expenses for labor, transportation and livestock, and working to maintain customer demand for high-priced meat.

"I'm embarrassed and I want to let you know that I take full responsibility for my action," said Tyson, 32.

A college-age female was alarmed to have found Tyson, whom she did not know, asleep in her bed on returning home, according to a Fayetteville police report. The police report cited "Tyson's unlawful presence in a house, where he was not invited, paired with the odor of intoxicants, and his general demeanor when confronted by uniformed officers."

Tyson Foods said a three-member governance committee on the board of directors will lead its review process. According to the company's website, the committee members are Les Baledge, former Tyson Foods general counsel; former Arkansas Governor Mike Beebe; and David Bronczek, former FedEx Corp president.

"Our independent board of directors are overseeing a thorough review of this matter, and I'm confident in this independent process," Chief Executive Donnie King said.

But experts urged Tyson Foods to hire an external firm because of John R. Tyson's deep family connections to the company.

"The board should send a strong signal that independence is important and publicly appoint an external adviser to conduct the review," said Paolo Volpin, a finance professor at Drexel University in Philadelphia.

Philip Cochran, a management professor at Indiana University, said company investors and John R. Tyson would benefit from an external review.

"It's certainly not going to clear him, at least in the public's mind, if it's done simply by the board of Tyson Foods," Cochran said. "There's too much potential for this to be seen as a conflict of interest." (Reporting by Tom Polansek; Editing by Chizu Nomiyama and Jonathan Oatis)

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