OPINION: Fonterra’s new proposed governance changes deal with one of the biggest concerns farmers had with an initial proposal which was the right for any one farmer to put their name up for election to the Fonterra board.
Under the proposed amendments a supplying shareholder can get his or her name on the ballot paper by collecting 35 signatures in support of their nomination. Although the number of 35 is somewhat arbitrary, it does make sense to have to find at least a modicum of support for a nomination to weed out the frivolous ones.
A candidate, once in the selection process, cannot then step outside of it and put his or her name forward in that same election cycle by collecting 35 signatures. The candidate may however do so in a later cycle.
The consultation document discussed the risk of an «old boys’ network», but did not make clear how this will be avoided in the processes of the board nominations committee.
Ideally, the committee would as one of its parameters consider how a candidate constructively challenges traditional thought. But that may not happen. It is always tempting to select a person who thinks like yourself, but that will not always be in the interests of the cooperative as it may lead to groupthink which is a risk to any governed entity.
Having said that, there will now be an avenue for candidates, who are prepared to challenge conventional wisdom, to put their name forward by collecting the required signatures. So this offers some mitigation.
The document describes how the nominations committee selects its preferred candidates from the list provided by the Independent Selection Panel, it is however not until the end of the document where changes to the nominations committee charter are described that it becomes clear that the nominations committee reserves the right to select candidates outside the process that are not on the shortlist provided by the panel.
This is commonly known as shoulder tapping and could be seen as an opportunity to promote an old boys’ network.
The board and the Shareholders Council will have to provide a rationale of why it makes sense to have this provision in the committee charter. This particular provision is not a constitutional change so could be removed without much fuss in the future if farmers were to object to it. Of course, it is likely that it will rarely be used
The reduction in board size has not changed from the defeated proposal that reached a majority but failed to get over the 75 per cent threshold. Some farmers may feel that a further reduction is desirable.
We need to consider, however, that we are a co-operative with a public listing, needing a mix of professional and farmer-elected directors, which points to a greater number of directors than a normal public company would need. I consider that any number in the 9 to 12 bracket would be right for Fonterra. The proposed number of 11 directors hits that mark just above the centre.
The representation review is actually a hard one as it requires a shift in culture.
No constitutional change is required for that, it is more about the way the council operates and interacts with farmers.
The proposal does require some changes to the council bylaws. The council has to be seen to do its job.
There has been talk of overhauling the networker system for many years, but this has never happened. There need to be clear expectations of networkers around performance and there needs to be some monitoring around this.
The argument that if we have KPIs for networkers we would have no-one putting their hand up, is defeatist. In that case it would be better not to have networkers at all.
The Networker Conference needs to be revisited simultaneously, should it be open to all interested suppliers and should it be subsidised to the extent that it is?
It is an important showcase event providing a relevant window into our co-op. Currently, it is a networker-only event and the networkers are heavily subsidised to attend.
A number of announcements and updates coming from the chairman of the board could well be communicated by the Shareholders Council instead and council and board need to discuss that possibility as part of a new council communications strategy. Sometimes it can be the little things that subtly raise the profile of council.
The flagged reduction in councillor numbers is a logical progression from the original 48 and a number in the high 20s would make the council more efficient in its operations, especially if the council induction process was improved and increased upskilling required for new councillors.
There needs to be a requirement for Co-operative Affairs (previously called Milk Supply) to have more meaningful consultation with the council over matters that have an impact behind the farm gate, preferably before it goes to the board table.
When I co-chaired the very first governance and representation review we started a journey that needs to be ongoing.
We have come a long way since then and the current proposal is a sound step forward.
Nothing is perfect and today’s perfection is tomorrow’s imperfection. It’s the direction of travel that matters.
This proposal is a clear improvement on the previous one and I recommend that shareholders vote for it and put the review behind us for now.
Source: Stuff
Link: http://www.stuff.co.nz/business/farming/84645265/farmers-right-to-stand-for-fonterra-board-clarified
