What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
While only 10% of farmers want the council abolished, a majority have questioned the effectiveness of the 25-member council.
The common theme among most submissions is a view the council has failed to perform on its four main core roles – representation, monitoring Fonterra’s performance, farmer connection and representation.
A steering group, formed to review the council’s performance, collected feedback from 1400 shareholders and sharemilkers via an online survey. An interim report was released to farmers 10 days ago and a copy was obtained by Rural News.
It’s clear from the report that Fonterra farmers want the council to stand up to the board and not just accept its decisions on key issues. Many respondents feel disconnected or isolated from the company they own, and they place responsibility for this with the council.
Covid-19 restrictions prevented the steering group – made up of Fonterra directors, farmers and councillors – from meeting farmers. A consultation round has been scheduled for September and October. A final report will be delivered by the end of November, instead of August as earlier planned.
With just 10% of submitters backing the abolishment of the council, it is highly unlikely the steering group will recommend that.
Steering group independent chairman James Buwalda told Rural News that it was too early to comment on what it will recommend.
Buwalda says there were strong views that the perceived performance or effectiveness of council was not up to expectations.
“We are therefore focusing now on what needs to be done to improve the perceived performance/effectiveness of these critical functions for farmers,” he says.
“Until we have considered options more critically, it is too early to say what our recommendations for fulfilling these functions will be and what implications such recommendations may have for the council.”
On representation, while 67% of respondents rated the council’s role as important, 60% said it is ineffective.
Fonterra’s board also came under scrutiny. The report says many perceived the council to have little influence with the board.
“Concern was also expressed about the board’s willingness to engage with and listen to the council,” the report says.
The council’s role in monitoring Fonterra’s performance also drew a lot of comments. While 72% rated the role highly, over half said the council’s performance in this regard was “less than average”. There were calls for greater council engagement when the board is considering significant strategic decisions and investments, and calls for the use of professional advisers and analysts by the council to keep a tab on the co-op’s performance.
There were also calls for the council to be better connected with farmer shareholders.
“Some felt the council offered little or no value for farmer connection, perceiving a lack of courage to express its own views, and suggested that farmers could connect directly with the board instead.”
There was strong support for the council’s guardianship of co-op principles. But over 40% say the council is failing in this department as well.
“Comment on the director election process was common, with most supporting the council’s role.
“However, concern was also expressed about perceived weaknesses and failures in this process recently,” the report says.
The steering group is currently planning the schedule of farmer meetings.
“We are keen to ensure all farmers that want to participate in such meetings are able to do so.”
