Profit focus falls off the radar
The dairy industry has lost its mojo in the last six or seven years, according to a leading dairy farmer, Trevor Hamilton.
Speaking last month at a seminar on succession planning at Massey University, Hamilton explained how and why the model works.
Hamilton and his wife Harriet own seven dairy farms and have a majority shareholding in another. He came up through the industry the hard way, starting as a sharemilker and building the business for 40 years, during which the farms were held in trusts. But his ultimate answer to succession planning is a company structure.
When his business was producing one million kgMS he started to look at a new structure. When it reached two million, the Hamiltons decided the risks of two people owning and controlling the company were too great and it was time to change and he moved to a system of ‘formal governance’.
“The company structure is that we pulled all of the companies out of the trust into individual liability companies and TH Enterprises sits above that as a holding company [because] for succession planning it’s easier to shift shares from a company to a sibling.”
His board comprises himself and his wife Harriet and two independent directors – his accountant Greg Eden and farmer and academic James Lockhart who chairs the board.
“We have quite a good balance with me as the entrepreneur, Harriet the detail person, Greg as the financial solutions person and James the person who brings about the governance experience and knowledge.”
Hamilton says by not chairing the board he has signalled to the siblings and other people that he doesn’t have to control things totally and that he and Harriet take seriously the governance issue.
Hamiltons have five children all with roles in their farming enterprise. “We’ve shown the children what we have done in the last 10 years and the children know where we have come from and where we are going and there’s 100% buy-in. It’s great. But let’s face it, a profitable fast growing business excites children.”
One big advantage of the Hamilton’s business structure is that if any sibling has a major concern they are directed to the independent board members.
This helps draw a line between business and family, Hamilton says. “So where there is a tension I don’t have to discuss that tension with that family member. The independent board members do that.”
An issue raised at the summit was the longevity of a succession plan and its ability to deal with an immediate succeeding generation and future ones.
Hamilton says his structure will do that and he and Harriet have looked at how the board might look in the future. The company constitution is worded so family members cannot dominate the board. One or two of his children may join the board at some stage, but the other siblings and the board will have a say.
Hamilton is passionate about his business and remains committed to growing it.
Structures may change, the basic philosophy of governance and commitment to excellence will not change, he says.
