Fonterra will publish recommendations for the first rejig of its director and shareholder representation structures in 15 years on Thursday. The draft proposal from a long-awaited review of the farmer-owned dairy co-operative’s governance and representation will start landing in farmers’ mailboxes from April 14, and be posted on the New Zealand Stock Exchange (NZX) website, the company said.
The proposal would be included in this month’s edition of Fonterra’s Farm Source magazine.
New Zealand’s biggest company has had the same governance and representation structures since it was created under special enabling legislation in 2001 from the merger of most of the dairy industry.
The board has 13 directors – nine farmer-elected and four appointed. Farmer-shareholder interests are also represented by the Fonterra Shareholders Council of 35 farmers elected by farmers.
The release of the draft proposal follows regional roadshows, farmer meetings and the issue of a booklet to the cooperative’s 10,000-or so owners.
Fonterra observers are picking the proposal, drafted by a committee of director and council representatives with input from consultants, will advocate only conservative change despite last year’s big show of farmer support for a significant cut in the size of Fonterra’s board.
The case for a major governance review was highlighted last year by two former directors, Greg Gent and Colin Armer, who called for the board to be cut from 13 to 9 directors, winning nearly 54 per cent support for their remit at the company’s annual meeting in November. However a vote of 70 per cent support was needed to pass the remit. The pair wanted farmer-directors cut from nine to six and appointees from four to three.
They cited “serious” milk supply loss to competitors and unacceptable commercial performance at dividend and share price level as reasons for “fundamental change” in an unwieldly-sized board.
Both the board and the council voted against the remit saying a governance and representation review was already in progress and its results would be presented to farmer-shareholders early this year. The Institute of Directors at the time said whatever the size of a board of directors, it was important it underwent annual evaluation and review internally.
Institute chief executive Simon Arcus said it was important for shareholders and interested parties to bring scrutiny to bear on an organisation and this should be welcomed.
“A board needs to have a good answer to the concern of its shareholders. A good director welcomes this even if it is a very challenging experience,” he said. A second review booklet will also be issued to farmers this month, followed by a second round of meetings.
By: Andrea Fox