Former Fonterra directors Colin Armer and Greg Gent are on a mission to trim the size of the co-operative’s board.
And no, they say, it’s not a matter of political sour grapes.
Armer was a contender for the chairman’s job when the current chairman, John Wilson, was installed. He left the board soon after Wilson’s appointment.
Gent was a deputy chairman and was in the frame for the top job when Fonterra’s inaugural chairman, John Roadley, headed the board.
When Roadley stood down after the agreed one-year term, Sir Henry van der Heyden got the job.
«When it comes to Gent and Armer, you’ve got to wonder whether or not politics has reared its ugly head again,» says Waikato farmer Garry Reymer, who himself had a tilt at the board last year.
But Armer is adamant the only thing he and Gent want is a better performance from the company – which is by far New Zealand’s biggest exporter.
He says their moves are aimed at making Fonterra fitter and leaner.
Their remit to cut the board’s size down to nine members from the current 13, which will be put to Wednesday’s annual meeting, requires a 75 per cent majority to get through.
«We’ve had to come out of retirement to do this and it’s not an easy thing to do,» Armer says.
«No, it’s not sour grapes.
«We are wanting to add value to the co-op – to put some building blocks in place to lift it to another level.
«That’s probably our primary aim. We don’t want to be destructive in any way,» he says.
«We are not wanting to target any individuals but we think large groups of people are a lot less dynamic than a small, tightly knit group of people, so that’s the guts of it.»
» I can’t say [Fonterra management] get it right all the time, but nobody ever does.» – Waikato’s Garry Reymer
Armer says there is evidence in the corporate world that small groups of people can be held more accountable for their actions and that their performance can be measured more easily.
«We are frustrated that the [Fonterra Shareholders’] Council and the board promised a review three years ago and it’s been parked and deferred.
«Now, because of our remit, there is a whole lot of renewed enthusiasm for it,» he says.
Soon after Armer and Gent put forward their remit in mid-October, Wilson said both the board and the Shareholders’ Council were already working together to develop a discussion document on governance, to be put to shareholders meeting mid-way through next year.
«This is not something to be developed on the back of an envelope,» Wilson said at the time.
Fonterra’s governance and the size of the board has been an issue since 2012, but the false botulinum test that disrupted infant formula sales in 2013 and this year’s 1080 scare had taken precedence over the issue, Wilson said.
«Those discussions were quite rightly put on hold until those issues were under control.
«More recently, driving payout has had to take centre stage,» he said.
But Armer says change had been promised three years ago.
«In our view, that’s millions of dollars being spent,» he says.
«The constitution belongs to shareholders and it’s up to them to change it.
«More importantly, it’s a debate that’s being had by Fonterra shareholders. They are thinking about it.
«It [the debate] has been elevated and we are very pleased about that.»
Wilson is up for re-election as a director, but the whole governance issue — and whether Fonterra is sufficiently «fleet of foot» — is potentially more important, says one analyst.
«I think the play is to reduce the size of the board and to stack it from there,» he says.
» The constitution belongs to shareholders and it’s up to them to change it.»- Former Fonterra directors Colin Armer
«It’s much more of a longer-term thing than seeing John Wilson removed from his seat in the near term. For me, the governance thing, and how that evolves over the next six months, is more important for Fonterra in terms of whether it continues to head down the value-add strategy,» says the analyst.
Former director Mark Townshend says if the size of the board is to be reduced, the way Fonterra elects its directors also needs to change.
«Today it is something of a raffle as to whether the constituency delivers the best quality available to the board table,» he says.
«The facts are that 10,000 farmers geographically spread across the country will not be in a position to accurately assess who are the best candidates.»
The Waikato’s Garry Reymer says Fonterra has more than its fair share of critics.
«There are some pretty harsh critics out there — but it’s still such a young company,» he says.
That view is mirrored by a former top executive, who argues that though it has been going since 2001, Fonterra is still «in its adolescent years» relative to its evolution, which was achieved through scores of mergers and acquisitions.
Reymer says the inaugural chief executive Craig Norgate and his successor, Andrew Ferrier, had bedded down systems and structures for Fonterra — which was an amalgam of Kiwi Dairy, Dairy Group, and the Dairy Board.
«It wasn’t until [current chief executive] Theo Spierings came along that we started to get a proper strategy going — thinking about who we are, what we are and what we want to deliver to the market,» Reymer says. «I don’t think the governance is bad and I don’t think the management is bad. I can’t say that they get it right all the time, but nobody ever does.»
Source: NZ Herald