Former Fonterra directors and large scale farmers Greg Gent and Colin Armer are proposing the number of directors at New Zealand’s biggest company be reduced from 13 to nine. They will take their proposal to the company’s annual meeting in November, arguing a smaller board is essential to improve the governance and performance of the farmer-owned co-operative.
The proposal requires the number of farmer-elected directors to be reduced from nine to six, and independent appointed directors from four to three. The proposal faces a high hurdle. To change Fonterra’s constitution for the reduction will require 50 per cent support from the Fonterra Shareholders Council and 75 per cent backing from its 10,000-or so farmer-shareholders.
Fonterra chairman John Wilson has responded strongly to the proposal, saying that bringing a resolution on governance and representation to an an annual meeting «is not the way our co-operative operates». Wilson said the board and Fonterra Shareholders Council were working on a discussion document around these matters to take to shareholders early next year for a vote mid-year.
«This is not something that can be developed on the back of an envelope,» Wilson said.
But Gent said news that a governance review is underway will be a surprise to shareholders.
«The governance review was promised at the annual meeting in 2012 in reaction to another proposal dealing with governance put forward by another shareholder. That review sank without trace, so farmers will no doubt be sceptical about another promised governance review,» said Gent.
«It was a high priority then and three years is more than long enough for them to get recommendations out to shareholders,» he said.
Wilson said Fonterra needed to have a constructive consultation with shareholders – «not impose a solution developed by just two of our farmers».
Armer said he was disappointed Wilson had attacked them for raising the issue.
«We have deliberately focused on the issue, not the personalities. The constitution of Fonterra belongs to its farmer owners, not the board or the chairman,» Armer said.
«We have every right as farmers to bring a resolution to the annual meeting.»
Wilson said Gent and Armer knew the governance and representation review was top of the the company’s agenda before Fonterra’s false botulism scare and more recently the 1080 poison threat.
Discussions had quite rightly been put on hold until those issues were under control and more recently lifting the low milk price to farmers had been the company’s focus, Wilson said.
But Gent and Armer said to blame the food safety scares for the delay in addressing governance and representation, which had not been formally reviewed in 14 years, was «farcical».
They said a company of the size and resources of Fonterra could surely deal with more than one big issue at a time.
The lack of action was exactly why they had made the proposal.
Fonterra leaders have been under fire for the co-operative’s low dividends to farmers from its value-added businesses during a prolonged period of low milk prices which have seen many operating below the cost of production.
Gent said a smaller board would ensure all directors were accountable for performance with no «passengers» on the board.
He said lack of confidence in the company was now causing serious milk supply loss to competitors and its commercial performance was «unacceptable» on both the dividend and share price.
The annual election process for Fonterra farmer directors is now underway. Wilson and sitting directors Blue Read and Nicola Shadbolt are seeking re-election. There are three farmer challengers for a seat at the top table: Murray Beach of Marlborough, Greg Maughan, Marton and Ashley Waugh, Te Awamutu.
If supported, the Armer-Gent proposal requires the shareholders council to hold an election for six farmer directors in March 2016.
Source: Stuff