Duncan Coull said there is an «underlying current of distrust» within Fonterra, driven by a combination of misinformation, a perceived move away from core cooperative principles, and emotion because of the low milk price.
But he suspected the difference between governance and shareholder representation was not well understood by all farmer-shareholders – for which the council had some responsibility – and urged «caution» in the October director elections.
Fonterra chairman John Wilson, and fellow directors Blue Read and Nicola Shadbolt are due by rotation to seek re-election or stand down this year. Voting will open in October.
Coull, two weeks into the job, was asked if shareholders were in a mood to punish these directors at the polling booth for the current milk price doldrums, Fonterra’s failure to produce a strong dividend in a low milk price time, and a claimed general unease about its leadership.
«Not necessarily in a mood to punish, but in some of the discussions I’ve had with shareholders they would like to see more of their directors. When I ask them why they want to see more of them and what governance means to them (farmers), in a lot of cases it’s around representation. There’s a lot of mixed messages around.
«The council carries out the representative function and directors carry out governance, and I’m not sure that is well understood by all farmers. As chairman it is one of my key focuses. I’m not sure the model has been working to the full extent yet.»
Directors showing up regularly in a farming neighbourhood was not a governance role, Coull said.
That was representation.
Before Fonterra was created from an industry merger in 2001, farmers were represented by regionally-elected directors.
«(Now) we need to ensure our governors are governing the (national) business. Their primary function is to extract performance on behalf of shareholders. Governance is driving the culture and the strategy in the business through the management team, holding that management team to account, and managing the risk associated with running such a large business.
«It’s not a popularity contest. It’s a big business with $20 billion revenue and we have to ensure we have the appropriate people as governors.»
Coull, who farms 700 cows on two properties at Otorohanga in the Waikato, agreed with Federated Farmers dairy chairman Andrew Hoggard that the council would be more effective in repairing the disconnect farmers are saying they feel with Fonterra, than its board of directors.
«We often talk about engagement and participation but it needs to be deeper than that and we need to connect. To me connecting is about forming strong relationships and relationships built on trust.
«There’s an underlying current of distrust within Fonterra and we need to understand what is driving that.
Coull said he did not view being elected chairman in the serious dairy downturn as a hospital pass.
«I’d see it as an opportunity for myself and the council. In difficult times in business, farmers tend to be more engaged and there is an opportunity for the council to get alongside farmers in a more meaningful manner.»
Coull said the council had to connect with the «silent majority» of shareholders, which was admittedly becoming «a little more vocal».
He said Fonterra’s guaranteed milk price scheme (GMP), which has sparked claims the cooperative is moving away from its core principles to a winners and losers scenario, was on the council’s agenda for discussion this week.
But not too much should be read into that, he said.
«The council’s approach to GMP is that it has been a pilot and that we needed to understand the effect on the shareholder base through the full cycle.
«The challenge within the council is that we tend to hear from a vocal minority which is why it’s really important we connect with the silent majority to understand where they see the cooperative as a whole.»
Coull said he was uncomfortable with the council being described as a «watchdog» for the interests of Fonterra’s 10,000-or so farmer-owners.
«We need to have a good think about what we are doing here and ensure what we are doing is adding value for our shareholders. We should be measured by our performance and lifting value for shareholders.»
Source: Stuff
