Survey shows most Fonterra farmers plan to use capital return for debt reduction
A large slice of the $3.2 billion proposed capital return for Fonterra farmer shareholders could end up with the banks.
With no disrespect to the other three candidates, it still looks highly unlikely that Wilson, Read and Shadbolt will be thrown out by farmers.
But the actions of two former directors have thrown a spanner in the works for Wilson and the board: suddenly the 2015 vote and this month's annual meeting promise excitement.
Colin Armer, a corporate farmer, and Greg Gent, a well-respected company director, lobbed a grenade last month. They want shareholders to vote for a reduction in the size of the board, currently 13 directors -- nine elected and four appointed.
Knowing very well that they would not find much support within the board, Armer and Gent have gone directly to the shareholders, seeking approval for "a leaner and fitter Fonterra".
They argue that accountability for the performance of the company begins at the top. A meaningful reduction in the size of the board will improve board efficiency and decisionmaking, they say. A smaller board will give greater clarity to our cooperative's strategic direction for the future.
Boards with double-digit numbers of directors are rare. Other New Zealand cooperatives have smaller boards: Tatua and Ballance each have eight, yet they are high-performing companies. When Air New Zealand was rescued from collapse it had 13 directors; today it is a high-performing company with only seven directors.
However, the Gent/Armer motion has a big hill to climb: they need 75% support from shareholders and a 50% 'yes' vote by the Shareholders Council.
With both the board and the council recommending farmers vote against the proposal, in favour of a detailed review of the governance structure, the showdown is on.
Forget the board election results; when voting figures are announced at Fonterra's annual meeting at Waitoa on November 25, all eyes will be on what farmers thought of the Gent/Armer motion.
A healthy 'yes' vote will pile more pressure on Wilson and the board to act -- fast.
Fonterra farmers have faced two challenging seasons. With dairy prices still fluctuating, the light at the end of the tunnel seems some way off.
If Gent and Armer's proposal for a fitter, leaner board resonates with shareholders it could signal a major upheaval for the co-op.
Farmers have risen against the board and management before: look at the Trading Among Farmers (TAF) consultation. They may be in the mood to do that again.
