Tuesday, 24 November 2015 09:35

Too much risk in remit to downsize

Written by  Sudesh Kissun
Former Fonterra farmer director, Mark Townshend. Former Fonterra farmer director, Mark Townshend.

A former Fonterra farmer director is warning that moves to downsize the co-op's board is fraught with risk.

Mark Townshend, Ngatea, says a strong vote this week for the remit by former directors Colin Armer and Greg Gent could destabilise the co-op.

"It could also reignite the whole political stuff around the co-op," he told Dairy News.

Armer, a corporate farmer, and Gent, a company director, have put a remit to this week's annual meeting in Waitoa, asking shareholders to vote to reduce the size of the board, currently 13 directors -- nine elected and four appointed.

Fonterra's board and the Shareholders Council have rejected the motion.

Gent, who chaired Kiwi Co-op before it merged with NZ Dairy Group to form Fonterra, served as deputy chairman for the co-op under Henry van der Heyden. Gent retired from the board in 2011.

When van der Heyden retired in 2012 John Wilson became chairman, beating Armer in a close contest; Armer subsequently resigned from the board.

Townshend says while the old Kiwi Co-op/Dairy Group politics has "pretty much broken down", the Armer/Gent resolution could re-open political divides on different lines.

Townshend is voting against the remit but he's worried it might get sufficient support from farmer shareholders to make a more balanced and communicated governance review proposal over the next months, led by the board and council, difficult to attract the required 75% support. Townshend says he does not think the Armer/Gent resolution has "a hope in hell" of getting 75% support, but even at 40-50%, when proposed at an opportunistic time when farmers are financially hurting, just makes a more thorough and thought through governance review proposal a little harder.

"I'm worried they will get more support because people are angry with the company; they would vote for it because they could put one up the company."

Armer and Gent are unhappy with the performance of the co-op and want a leaner board to change its fortunes.

Townshend agrees Fonterra's financial performance and shareholder relations leave much to be desired. He also agrees that whatever Fonterra comes back with in its governance review, it is likely to have some elements of overlap with the Armer/Gent proposal.

"Fonterra looks in a bit of a bind in several ways; it does not have forever to sort it out," he says.

"They are actually spending a lot on pie-day Fridays and putting extra people in jobs to try to communicate, rather than solving the core root of the problem of having a real group of people running supplier relations – both governance and management."

Townshend says the resolution smells of politics despite what Armer and Gent are saying.

 

Current board is farmers' doing

Mark Townshend says farmers have only themselves to blame for the current makeup of the Fonterra board.

"It's a bit rich blaming the directors when shareholders themselves voted in the board. Over the last six years shareholders have voted in a new director each year; only one of those had a really good candidate assessment score (under the candidate assessment panel process). If farmers had supported the CAP process recommendation over recent years, only 4 or 5 of the current 9 shareholder Directors would be sitting around the Fonterra board table today.

"We need to look at how we get the right people onto the board; using a beauty contest to reduce the current board from nine to six elected directors is fraught with risk."

"There is no doubt that a board of nine in a perfect world would be better than 13. But what will happen if, of the proposed six shareholder directors, one is so inexperienced they add little value, one is there by past reputation and is just warming a seat, and one is some firebrand voted in by shareholders who will have zero impact around the table if they cannot work as part of a team?"

More like this

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

Editorial: A new era for two co-ops

OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.

Should co-op sell its consumer brands?

OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

New McHale terra drive axle option

Well-known for its Fusion baler wrapper combination, Irish manufacturer McHale has launched an interesting option at the recent Irish Ploughing…

Amazone unveils flagship spreader

With the price of fertiliser still significantly higher than 2024, there is an increased onus on ensuring its spread accurately at…

» Latest Print Issues Online

Milking It

Tough times

OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.

MSA triumph

OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter