Thursday, 02 June 2022 15:25

Reviewing NZW Governance, Representation and Levies

Written by  Philip Gregan
New Zealand Winegrowers chief executive Philip Gregan. New Zealand Winegrowers chief executive Philip Gregan.

In the lead-up to the 2021 levy votes, the New Zealand Winegrowers board received feedback from some members that while they broadly supported New Zealand Winegrower (NZW) and its activities, they were concerned about specific issues around the levies and respresentation on the board.

Given the timeframe in place around the levy votes, the board decided it could not address those specific concerns before the levy votes. However, it agreed to conduct a review of governance, representation and levy issues following the levy votes, in order to consider those matters. The board agreed that if necessary, following the review, changes might be needed to the NZW rules and/or levy orders.

In levy-funded industry organisations like NZW, these matters lie at the very heart of organisational structures and activities and are central to ongoing support from members. As such the review is important and the issues being considered need to be thought through carefully. So, what are some of the key issues?

Who does NZW represent?

NZW aims to be representative body for the New Zealand grape and wine industry. That means currently NZW represents all growers (effectively anybody who sell grapes) and all winemakers (effectively anybody who produces and sells wine).

However, the scope of NZW representation could be narrower or broader. For example, NZW could choose to include contractors, bottlers, distributors or retailers in its definition of the New Zealand grape and wine industry, or could exclude very small growers and/or wineries. Who NZW represents is a fundamental question. Once defined it then can influence funding and representation arrangements, as well as the scope of NZW activities.

How do you elect a representative Board?

In industry organisations boards generally have combined representation and governance functions. If all members were similar (in scale, business model etc) ensuring a board representative of the industry (so it can represent the industry) would be a simple exercies. However, NZW has a highly diverse membership - diverse in terms of growers and wineries, size of business, region and subregion, business models, market focus etc - which means ensuring the board is representative is not a simple exercise, especially given the board needs to be of a manageable size.

There are clearly many ways the NZW electoral system could be organised, but whatever system is agreed, it needs to be supported by a broad cross-section of members. One thing is certain, no system will be perfect.

Prior to the current system, board membership was split seven places to wineries (three to large, two to medium and two to small), and five to growers (split regionally).

This produced diversity, but there was debate about where the (arbitrary) divisions, between the winery categories should be set and as Marlborough became larger, about its level of representation in the grower grouping. It also split growers and wineries into separate groupings, despite the fact that many businesses pay both grape and wine levies.

Given these concerns, when NZW was formed the philosophy became, 'We are all Winegrowers'. On that basis the distinction between growers and wineries was dispensed with, as were the arbitrary size and regional divisions. Instead, an election system was initiated on the basis of five directors elected on a one member one vote basis and another five on $1 levy payment one vote. Those directors go on to appoint two unelected directors creating a board of 12.

This system was deemed appropriate when NZW was formed, but is it the right formulation for the future? The review will consider if it is still appropriate or needs to reflect current or future changes in our industry.

All the levy questions and issues

Then there are a whole host of questions related to the levies such as: could we have just one levy, not the current two? Why is the grape levy value based and the wine levy volume based? Why don't winery grown grapes pay a levy? Why is there no minimum levy payment? And why is there no maximum levy payment?

The current levy systems reflect a lot of history that has brought us to where we are today. There are a range of possible formulations for levy systems which can, for example, be based on the area of crop or the volume or value of a product. The current system has worked until now, but is it the right system for the future?

If the system is changed there will likely be winners and losers in any change - ie those who pay less than under the current system, and those who pay more. Remember, however, that if we remain under the Commodity Levies Act, then any change to the levy regime needs to be supported by a majority of members (by number) and by a majority of the grape and wine value/volume.

NZW is going to take time to consider these questions and more over coming months. Members input into the review will be critical so watch out for notification on upcoming local meetings and information on the review as it is made available.

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