However, unlike dairy prices – which fluctuate at the mercy of issues outside the control of farmers – most of Fonterra’s misfortunes are home-made.
It all started with the ill-fated move to partially float the co-op back in 2006-07. Not only was that a naïve decision by the board and management, it also sowed the first seeds of distrust among its shareholders.
The fierce debate on TAF during the past two years has only fanned the fires of dissent. The 66% approval for TAF, achieved with the help of large corporate milk suppliers, was hardly a resounding success for the board.
In November last year, chairman Henry van der Heyden announced his intention to step down in 12 months. Fonterra shareholders, especially those opposing opening the co-op to outside investors, may have been hoping for a clean break. However, the messy appointment of John Wilson, a van der Heyden protégé, is anything but. Clearly, Colin Armer resigned after losing the chairmanship, proving van der Heyden still has the numbers on the board.
The outgoing chairman’s decision now to hang around after Wilson takes over is raising eyebrows. Rightly or wrongly, Fonterra shareholders do not believe Wilson has asked van der Heyden to stay on, rather that this was the plan all along.
Then there is the question of a deputy chairman. Some shareholders rightly question why Fonterra doesn’t have a deputy chairman, a natural successor if the chairman goes for whatever reason. Why was van der Heyden reluctant to appoint a deputy?
All this makes the 2012 director elections more interesting. Wilson is almost certain to regain his seat, therefore retain the chairmanship.
Embracing TAF has been difficult and divisive for Fonterra. At a time when it needs stability, questions on transition to a new chairman are rocking the boat further. Van der Heyden should have made it clear from the start that he would stay on as a director to ensure stability.
But Fonterra’s communication with shareholders has always been far from perfect. Sadly, the co-op hasn’t learnt that shareholders don’t like surprises.
