Tuesday, 16 February 2016 14:15

Fonterra review lacks clout – critic

Written by  Sudesh Kissun
Former Fonterra director Greg Gent. Former Fonterra director Greg Gent.

Former Fonterra director Greg Gent says the co-op's discussion booklet on governance isn't thought-provoking.

It only sets out the current state of governance and representation in Fonterra, he says.

"It's a very conservative booklet," Gent told Rural News.

However, Gent is happy that the co-op is addressing farmer concerns on the need for a smaller board.

"It's great that they are doing something about it; we will wait and see how things pan out."

Gent and another former director Colin Armer stunned Fonterra's board and Shareholders Council in November by garnering 54% support among farmer shareholders for a smaller board.

While the motion for a nine-member board fell short of the 75% required to force a constitutional change, it spurred the co-op board into coming out with a discussion booklet last month.

Titled 'Let's have the Conversation', it outlines the board and Fonterra Shareholders Council views on governance.

Gent says farmers want no more than a nine-member board.

"It aligns well with the culture of a fitter and leaner board and we are confident it will attract the right skilled directors."

Last week, the board and council held farmer meetings around the country to discuss the discussion booklet; next month the co-op will develop its proposal based on farmer feedback.

In April, a draft proposal will be submitted to farmers; a second discussion booklet will be distributed followed by another round of farmer meetings.

Farmers will vote on the final proposal in May.

In the booklet, the governance and representation review committee notes that it has spent more than a year benchmarking the co-op's governance and representation against what was considered world-class at the time and made a series of recommendations to the board.

"Their good work provides a strong platform from which to have a quality conversation about how best to evolve our structure, fine-tune our systems and adapt our skill set to meet the future demands of our cooperative," it says.

The committee is asking farmers to decide the right model to take Fonterra into the future.

"How do we provide for the roles and responsibilities of our directors, the skills we want to have at the board table, the balance between farmer and independent directors and the processes for bringing them onto the board?"

The committee notes that Fonterra has had the same governance and representation structures since it was established nearly 15 years ago.

"A lot has changed since then. Our revenue, assets and shareholders' equity have all increased considerably. Our international presence has increased with milk pools in Europe and China. Trading Among Farmers provides farmers with financial flexibility and improved information on our co-operative's strategy and performance.

"Fonterra's business strategy has also evolved, and was refreshed in 2013 with updated priorities. Its overall aim is to continue our cooperative's growth in revenue, value achieved and returns to farmer shareholders. It is good business practice for governance and representation structures to be reviewed following a change in strategy."

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