Tuesday, 27th October

Fonterra shareholders will “have their say”

Fonterra shareholders will still have their say on the bid to reduce the size of the Fonterra board from 13 to nine members say the two sponsors of the proposal.

Last Friday the Shareholders Council chairman Duncan Coull sent an email to all shareholders saying that the Council did not support the proposal put forward by former Fonterra directors Colin Armer and Greg Gent.

To succeed the proposal needs 50 per cent support from the council and at least 75 per cent support of voting shareholders.

Former Fonterra directors Greg Gent and Colin Armer say they are disappointed but not surprised by the council’s position.

“If the owners of the company, who own the constitution, support our resolution then we understand that the council can reverse its decision,’ Mr Gent said.

The council chairman’s email to shareholders said the council did not support the proposal because the method of downsizing the board proposed represented a risk to the cooperative in the way directors were to be elected, because there was insufficient time for consultation with shareholders and because a governance and representation review is in progress.

"We are disappointed council has misrepresented our proposal since it’s clear only the nine farmer directors would be required to stand for re-election, not the whole board. The transition we propose would be seamless, fair and, most importantly, quick.”

“We believe the council has misread the mood of the people they represent,” Mr Armer said. “Farmers want to see their board accountable and we continue to be humbled by the level of support we are getting from our fellow farmers.

“They know that the Constitution is their document and it is the most powerful way that they can send a message to the company. The council’s decision just further undermines the trust that shareholders have in their representatives and also indicates that Council does not trust farmers to exercise their vote responsibly.”

Mr Armer said a number of farmer shareholders have already told him that they believe the Council has confused the proposal by combining both representation and governance.

“Even with a board with reduced numbers the issue of representation will still need to be dealt with by that board and our view is that it is better to reduce the board numbers first.”

Mr Gent said that the new governance review would almost certainly recommend a single digit number of directors so why don’t we just get on with it instead of paying international consultants to tell us what we already know.

“The truth is we have never been told why the 2012 governance review sank without a trace,” Mr Gent said. “There is no reason why this new and hastily constituted one won’t do the same.

“Anyway it would be better to have the review after the downsize because then the directors won't be conflicted as they are now in doing a review – turkeys don’t vote for an early Christmas and with three positions to go directors will be reluctant to put their positions at risk even although they know it is in the best interests of the cooperative.”

Mr Gent said that any mechanism which did not elect all the new number of elected directors at the same time would be unfair.

“Either it is going to be unfair or it is going to take at least three years – or most likely both,” he said.

“Fonterra has three mantra's it pushes very hard - Value, Volume and Velocity,” Mr Gent said. “For those principles to succeed they need to be led from the top but the three-year old governance review is hardly an example of velocity!

“When the board looks at its own functions it takes over three years while a review of staff positions takes six months and results in over 700 redundancies. We have to ask what kind of messages staff are getting from the board’s behaviour.”

The pair say that the council is scare-mongering in relation to a very simple change.

“It seems the council doesn’t trust the owners to make considered decisions about their own constitution so we’ll get more consultation, more reviews, more delays and more costs while the most important change of all gets put off again.”

ENDS

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