Fonterra Co-operative Group has kicked off a review of governance by posing the question of whether a board stacked with farmers has the right skills to drive a global business and whether milk suppliers in other countries should be able to hold shares.
New Zealand's biggest exporter released a 13-page conversation starter ahead of farmer meetings this month, with the aim of having any changes to its structure put before shareholders for a vote in May.
The review follows calls last year by shareholders and former directors Colin Armer and Greg Gent to shrink the board and increase its calibre after the departure of experienced independent Ralph Norris, former chief executive of Commonwealth Bank of Australia. Auckland-based Fonterra has not changed its governance and representation arrangements since being set up 15 years ago although it undertook a full review in 2013.
Like overseas counterparts Arla Foods and FrieslandCampina, Fonterra has a co-operative structure that adds layers of farmer bodies and processes to its board, reflecting checks and balances put in place to protect the interests of its farmer shareholders but also increasing governance costs and complexity. By contrast, executives at rival Nestle, the world's biggest food company by revenue, answer only to its 14-member board.
"The review work to date has confirmed that our governance and representation structures have served us well, but there is a real opportunity to further strengthen them," Fonterra said.
