What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
Read: Fonterra Shareholders Council responds.
The farmers say the council has failed in its fundamental role to keep Fonterra’s board accountable and keep shareholders fully informed of the co-op’s performance and is now not required.
The group, headed by Waikato farmers Trevor Simpson, Jim Cotman, Malcolm Lumsden and Mike Peters, is urging other shareholders to make their views known to a steering committee set up to review the council.
Simpson says shareholders should ask what the council has achieved for them in the last 20 years.
“What have we got for our investment? Bugger…I can’t think of anything,” he told Dairy News.
“There has to be a better, more efficient way of monitoring Fonterra’s performance and keeping the board and management in line rather than having a 25-member toothless tiger.”
The council has an annual operating budget of $3 million. Simpson says farmers have poured around $50 million into the council over the past 20 years with little to show in return.
“We believe the council has done its dash and it’s time for it to be disbanded,” he says.
Lumsden believes the Shareholders Council is viewed as being more aligned with the board’s perspective rather than the shareholders’ views.
“A significant ‘red flag’ has been raised through the election process where many shareholders have chosen to ignore Shareholders Council recommendations and instead elected independent candidates on to the Fonterra board,” said Lumsden.
The group feels the council has shielded Fonterra directors from fronting up to shareholders more frequently.
Peters says the link between directors and shareholders has been lost.
“The directors show up during the election process promising to save the world: once they get on the board, we don’t hear from them again.”
Peters says other co-ops like Ballance and LIC have their chief executive making farm visits to meet shareholders. “The board needs to get out and make us feel part of the co-op,” he says.
“Shareholders feel a disconnect between them and the board and management.”
Simpson says the council review is providing Fonterra shareholders the opportunity to start afresh.
“The Shareholders Council’s lifespan is over; it’s time to move on and time to start fresh,” says Simpson. “We don’t need a big council costing us $3m a year to tell us how Fonterra is performing.
“We believe that shareholders are looking for timely reports from an independent source.
“We’re after a critique of the board’s performance against its stated strategy and KPI’s. Perhaps a small three to five-member shareholders committee could make this appointment.”
Simpson and his group filed a remit at the last Fonterra annual meeting, calling for an independent review of the council. The remit received 24% support, failing to meet the 50.1% threshold to pass. A similar remit by Southland farmer Tony Patterson received 44% support at the same meeting.
At the same meeting the council announced a review of its operations.
Simpson wants farmers to make their views known to the steering committee, which has at least four Fonterra farmer shareholders.
Steering committee member and Federated Farmers vice president Andrew Hoggard tweeted that the review process was going well.
“Looking forward to some good farmer engagement,” he says.
The committee is chaired by former senior government official James Buwalda. Other members are Judy Garshaw, Paul Quinn, John Small, Emma Hammond, Mike Montgomerie and two Fonterra directors John Nicholls and Donna Smit.
