Co-op at crossroads

They will be keen to note the reception given the remit is calling for a cut in the number of directors.

The remit, moved by former directors Greg Gent and Colin Armer, calls for a nine-member board – six elected and three appointed directors.

A 75% 'yes' vote is widely expected to be out of reach, however it is possible the remit could garner 50% support. This would throw the co-op's governance in turmoil.

The remit has exposed a divide in Fonterra – a division among directors and shareholders. During the 14 years since Fonterra's formation, the days of Kiwi Co-op and Dairy Group politics may have been forgotten. But farmers feel that not all is forgiven.

When the chairmanship changed in 2012, it was a close contest. Armer missed out by one vote and resigned; some farmers believe he is seeking vengeance. Gent also missed getting the chair when Fonterra was formed; he was chairman of Kiwi Co-op and Henry van der Heyden, as chairman of Dairy Group, got the nod.

Gent served as vice-chairman but never held the top job and retired in 2011. Some farmer-shareholders feel these two men have chosen this era of dairy downturn to put the boot into their co-op. But some agree with Gent and Armer that Fonterra looks in a bit of a bind in several ways. And time is running out for the co-op to sort out its woes.

Does the answer lie in altering the board? This means there will be wholesale change to management also.

And if the number of directors were to be reduced – which probably makes sense – then the way Fonterra shareholders elect directors would need to change.

One shareholder commented on the 'raffle' by which the shareholders now struggle to get quality at the board table. The gloomy fact is that 10,500 farmers geographically far-flung across the country haven't much hope of accurately assessing who are the best candidates. Also, many – probably most – shareholders know very little about the skills, experience and character needed in directors charged with running their co-op – the world's biggest dairy exporter!

This prompts the question whether Fonterra's director election system needs an overhaul. The candidate assessment panel, whose job is to advise farmers on the qualities of each candidate, should also be up for review.

But before these questions can be dealt with, there's the 'small' matter of dealing this week with this resolution.