Fonterra directors run up $5m bill

By PHILIPPA STEVENSON agricultural editor

Dairy giant Fonterra's big board of directors is proving expensive, costing the company $5 million in its first year.

Telecom - the country's second-biggest company behind Fonterra - paid its smaller board about $1 million last year

The $5 million bill covers Fonterra - with 13 directors - its subsidiaries and defunct formation firms. The money was paid to 32 people in 56 positions on nine boards.

Fonterra's bill included a $3 million payment on top of directors' fees.

The annual report described the $3 million as "other" payments to directors, but gave no further detail.

Stuart Gower, chairman of the shareholder committee that sets directors' fees, said they received payment for out-of-pocket expenses and accommodation, including an Auckland apartment for chairman John Roadley, who lives in Ashburton.

But Mr Gower said he didn't "have a clue" what the $3 million had been spent on.

Directors' first-year fees were set by the two boards of Fonterra's formation companies, Kiwi Dairies and New Zealand Dairy Group, and shareholders had no chance to approve them, Mr Gower said.

Fonterra Shareholders Council chairman Tony O'Boyle was also puzzled by the extra $3 million in Fonterra's accounts.

A company spokeswoman told the Herald the money went on directors' travel and accommodation.

Shareholders will vote on directors' fees for the first time at Fonterra's annual meeting on September 12.

The proposed fees are unchanged from last year - $190,000 for the chairman, $115,000 for the deputy chairman and $95,000 each for the other 11 directors, giving a total of $1.35 million.





Telecom's $1 million goes to eight directors.

Chief executive and board member Theresa Gattung does not get a director's fee.

Chairman Roderick Deane was paid $384,000 and five other directors received around $100,000 each.



Carter Holt Harvey's board cost $310,000. Four of its nine members are executives of the company or its majority shareholder and do not get fees.

Carter Holt Harvey chairman Sir Wilson Whineray got $100,000 and the other three directors $70,000 each.



The size of Fonterra's board was criticised early this year when director Mike Smith suddenly quit, citing concerns over its effectiveness.

Critics suggested nine members and fewer farmer directors would be more effective.

The company has reduced the number of farmer directors from 10 to nine, but increased the appointed directors to four.



Shareholders have also learned of a head office cost blow-out of $64.1 million, and a $200 million salary bill for the company's top 974 executives, including 14 - five more than identified in the annual report - who receive more than $1 million a year.

The Shareholders Council said in its annual report last week that it was "not satisfied the company has a strong focus on minimising cost".

Federated Farmers' Dairy Farmers of NZ said high costs were a key issue for shareholders to raise with the company.

Dairy Farmers chairman Kevin Wooding said the head office over-run and an excessive use of capital had resulted in interest-bearing debt being $903 million above budget.

"Farmers will be questioning whether similar excesses are occurring throughout the business.

"One of the perceived merger benefits was more efficient use of capital.

"Farmers have a right to question why this has not occurred, and what steps Fonterra will take to improve revenue and reduce overhead costs and working capital."

Mr Wooding said that the Shareholders Council report identified several major areas of concern.

"Farmers were promised improved transparency and it is very disappointing that the council has noted that it was difficult to obtain information from Fonterra."