Tuesday, 20 August 2019 11:55

Come clean now — Editorial

Written by 

OPINION: Over the past week, Fonterra has been maligned by various commentators.

Some call it the end of the dream. Others are writing off Fonterra’s chances of a return to the black and are even hinting at a white (Chinese) knight in armour galloping towards a buy-out of the co-op.

Yes, Fonterra is in dire straits. Its share price is hovering around $3.50/share - a far cry from its heyday of $6.60/share as enjoyed by farmers in January 2018.

But the doomsayers writing off Fonterra must think again. The co-op is facing a storm - no ordinary storm one could say. But no one should write off the co-op yet.

Fonterra’s financial woes have arisen from bad decisions. They were not made by its 10,000 hardworking farmer owners but by a management and board that had lost sight of key principles of governance.

 Fonterra is still earning billions of dollars by selling top quality dairy products worldwide. But it is also bleeding money via bad investments, mostly overseas. These investments - in China, Australia and South America - did not turn to custard overnight. The news media, commentators and some smaller players in these markets could see the problems growing on the horizon, yet the directors lacked the courage to admit they had it wrong.

This raises serious questions about the culture inside the Fonterra board. Who set the strategy? How often were strategy sessions held? Did the key leaders spend too much time in power play to maintain proper oversight and direction of the board?

It turns out that, despite their being 11 directors, the power has been concentrated in the hands of just one or two men.

Fonterra farmers should demand all 11 directors front up to farmer meetings to explain what each did to control or end the disastrous investment that have bled money over the years. 

Some commentators say boardroom power at Fonterra is concentrated in the hands of two people -- the chairman and the chief executive.

A chairman behaving as if he were an executive chairman saps morale among other directors and managers. Discussions, questions and comments on strategy can only come to nought when the chairman’s less-powerful colleagues know ‘the boss’ has already decided strategy.

It’s too late to haul back former chief executive Theo Spierings from Europe to answer questions, and former chairman, the late John Wilson, has made his last exit.

Fonterra farmers must now take their losses on the chin as they determine to move on. But in one other thing they may also act powerfully in demanding that the directors come clean immediately on the state of poor investments that need to be written off.

More like this

$1b windfall for shareholders

Fonterra's plan to return $1 billion to shareholders in three years through the divestments of overseas milk pools is the right move, according to Waikato farmer Andrew McGiven.

National

Why should we do more?

OPINION: Managing our dairy sector's impacts inevitably attracts a range of views. Should we do more, less or stay the…

Cattle sale with a difference

Innovation, loss and resilience have brought the Singh family to the point where it is poised to honour its patriarch,…

O'Connor's overseas odyssey

Agriculture Minister Damien O'Connor continued his overseas odyssey in the past week with multiple meetings in the US, Europe and…

Machinery & Products

Protective tint

Now available in New Zealand, Wildcat Static Cling Tint adds a protective layer to the windows of your tractor, harvester…

New owner for stoll

German company Stoll, the well-known manufacturer of tractor front loaders and attachments that claims to be the second largest producer…

Fert spreaders get a revamp

Kuhn has updated its MDS range of fertiliser spreaders, giving farmers more options to upgrade machines as situations change, rather…

Mowers spring into action

With spring upon us, thoughts turn towards shutting up paddocks for conservation and maybe the purchase of new machinery to…

» The RNG Weather Report

» Latest Print Issues Online

Milking It

Feeling the heat

US dairy farmers have a new threat to their business - heat waves.

Class action

The news has gone from bad to worse for a2 Milk - the company Synlait had hitched its wagon to.

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter