A common complaint of shareholders in recent years has been they feel disconnected from the company they own. Photo / File
A common complaint of shareholders in recent years has been they feel disconnected from the company they own. Photo / File
Fonterra farmers' opinions of their $3 million-a-year shareholders' council will be published as part of a review of the organisation, under the gun for its soft treatment of the under-performing dairy company.
New council chairman James Barron said shareholder submissions would be shared but wasn't sure yet of the method.History would suggest they could go up on a website accessible only by Fonterra suppliers.
The 25-farmer council which has a 2020 budget of $3.2m is seeking four farmer shareholders for the review steering committee, which will also comprise two councillors, two Fonterra directors and an independent chairperson.
The council in November narrowly beat off a shareholder bid to put its effectiveness under an independent, professional microscope. At the annual meeting of New Zealand's biggest company, the call by South Island shareholder Tony Paterson won close to 45 per cent support despite the council and the Fonterra board recommending shareholders vote against it.
Paterson told the Herald that less than a week after he submitted his resolution for the annual meeting, the council announced there would be a review of its work this year.
Paterson's call came after Fonterra announced a net loss of $605m for FY19 on the back of asset writedowns of $826m. The big cooperative's farmer owners have experienced about $4 billion of wealth destruction in the past two financial years, according to the council.
Paterson wanted a professional assessment of the council's role, its fitness for purpose and if a better model was available to guard co-operative shareholders' interests, in acknowledgement "the current model is not working for (Fonterra) owners".
His resolution sought to ensure the shareholder representative structure was independent of the company. The council has long been criticised by some shareholders as being more of a company lapdog than a watchdog for its owners.
Chairman Barron will select the four farmers of the steering group after viewing expressions of interest, which close on Monday morning.
In an email to shareholders, Barron said the steering group would report on the following matters and make recommendations:
• how well has the council fulfilled its constitutional functions since the last review in 2016 and are there any learnings? • what should representation look like? • what should that representation function achieve? • what resources, behaviours and culture are required to empower that representation function? • to what extent is this a change from the present?
The steering group and Barron are to report to shareholders by July 31.
Asked if the council would seek external, professional advice in the review, Barron said it was important to understand the council wasn't undertaking the probe.
"The steering group will decide how to manage the consultation, and what resources if any, they will require."
"A lot of debate went into the make up and number of people in the steering group. The aim has been to find a balance between having a reasonable level of knowledge and understanding of governance, representation and management of the co-op itself, and having sufficient independence and objectivity, as well as keeping numbers at a level conducive to effective debate and decision-making," he said.
"The largest and most critical input into this process is the farmers' views."
Fonterra Shareholders' Council chairman James Barron. Photo / Supplied
It wasn't yet known which Fonterra directors would be on the steering group, Barron said. The steering group would appoint the independent chairperson.
The role and responsibilities of the council, founded in 2001 when Fonterra was created under special legislation which circumvented the Commerce Commission, are defined by the company's constitution and council bylaws. Fonterra still collects about 80 per cent of the country's raw milk from 10,000 or so shareholders.
Barron said changes to the constitution required 75 per cent support from shareholders and 50 per cent support from the council. Changes in the council bylaws needed 75 per cent shareholder support.
Shareholders approached by the Herald considered the review very important if farmers were to have any confidence in the co-operative after recent shock financial results and the diving Fonterra share price. A common complaint in recent years has been they feel disconnected from the company they own.
Cambridge shareholder Garry Reymer said it was vital to ensure farmers felt part of the business, and that they still owned it.
"We have to get to that point or we have lost our co-op."
Reymer said voting matters needed to provide a clear mandate for action and for that the requirement for all votes should be 75 per cent, not 50 per cent.
