Tuesday, 25 September 2018 11:48

Start with the board — Editorial

Written by  Peter Burke
Trevor Hamilton. Trevor Hamilton.

Why is Fonterra in a pickle? Is the death of democracy and a blob of arrogance in Fonterra to blame for the current crisis? 

That is really what is being said by the dairy farmer Trevor Hamilton, known as a progressive, innovative farmer and a good businessman. 

He is recognised and respected for the way he has structured and runs the family business and, yes, he has an independent chairman. His approach to succession planning mirrors that of Maori. And he balances sustainability and profitability  

So why didn’t he get on the Fonterra board? He thinks outside the square as do others who have tried unsuccessfully to become acolytes in the inner circle of Fonterra directors.  

We should be excused for thinking Fonterra is something of an old boys’ club where only ‘yes’ men get the call to the inner sanctum -- the board. 

That is not to say that all the present directors are not good, but the perception points to the reality.

Fonterra is a cooperative and it holds to that in some ways, such as making sure all farmers are paid the same price for milk regardless of whether they farm well or, conversely, think nothing of polluting a stream or treating staff badly.

So why not have a fair and free election to the board? Does the establishment group on the board not trust farmer shareholders to vote in the right people? That is scary!  The Fonterra model for electing directors is akin to the practice in totalitarian jurisdictions. Their version of democracy has long been disregarded by the western world but not, it would seem, by those who inhabit the lavish tower block on Auckland’s trendy Fanshawe Street.

Hamilton is right in saying Fonterra needs to change. To do that it must embrace people who can make change happen for the best and the future. 

Fonterra is bigger than its farmers -- a cornerstone of the New Zealand economy. Right now people are correct in not trusting the same old board to make the radical changes necessary to get the cooperative back on its feet. 

If the present directors can’t see their way clear to bring in new and creative people and make the necessary changes, what is the answer? The possibility of a strong critical shareholder council is probably too big an ask, so must it fall to the Government -- which created Fonterra -- to step in and legislate to compel the cooperative to perform better in the national interest?


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