Is Fonterra's Sir Henry van der Heyden staying on past his use-by date as the dairy co-operative's chairman to protect chairman-elect John Wilson from a boardroom coup?
That question was doing the rounds even before Fonterra confirmed on September 27 that van der Heyden would not step down from the board as expected this December when he hands over the chairmanship to John Wilson at the co-op's AGM.
Van der Heyden will instead stay on for an unspecified period - expected to be much less than the December 2013 period when his term as an elected board member runs out - to ostensibly "provide continuity around the board table" until after Trading among Farmers (Taf) is up and running.
The industry insiders had pointed to two motivations that might galvanise van der Heyden to stay on beyond this December. First, that van der Heyden, who has steered the company for nigh on 10 years, was not prepared to face up to the fact he had reached his use-by date.
The second, that van der Heyden really wanted to stay on the board to ensure his successor did not face a boardroom coup if the farmer shareholders elected new directors who were not from the camp that supported John Wilson as their new chairman.
A smooth transition to the Taf is important. It is designed to provide permanent capital so the $19 billion company is not subject to redemption risk. Already international interest is high in the plan to offer the public NZX-listed units in farmer-owned shares.
But the brute reality is the Fonterra board's decision to protect Wilson's leadership has also influenced the decision by both van der Heyden and independent commercial director Ralph Waters to stay on after the AGM. Getting the Taf bedded down is basically an executive and not a governance role. And in any event Wilson is well-qualified to lead this given the fact that he headed the board's capital restructuring effort as chair of the capital structure committee.
A backlash has clearly been brewing on three fronts. Not all dairy farmer shareholders are enamoured of the board's decision to elect Wilson as their new chairman over fellow farmer director Colin Armer. The $8 million golden handshake to former Fonterra chief executive Andrew Ferrier also galls. Some industry players believe Ferrier simply rode the "white gold rush" as demand surged from big Asian markets such as China for safe New Zealand milk powder to make products like infant formula.
Then there is the fact that Fonterra has been out-gunned on the milk payout by a small NZ dairy company, Tatua.
Dairy farmer politics are rugged and ruthless. But it would appear it will take a great deal of persuasion to get farmer shareholders to look past the three big niggles and concentrate on the pending debut of the Taf and the ability it will give Fonterra chief executive Theo Spierings to lead the company through its strategy refresh, in which the extent of ambition and the pace of its delivery are dependent on the ability to access new capital.
There are three farmer director positions up for grabs in December.
Wilson is standing for re-election. The number of votes he gets will be an early indication of his real support in the wider farmer shareholder base. Director and academic Nicola Shadbolt is also up for re-election. The third vacancy has been caused by the exit of Armer, who lost out on the chairmanship after the independent commercial directors swung their support behind Wilson. Jacqueline Rowarth, a Waikato academic, has tossed her hat in the ring. Other names will emerge next week.
Van der Heyden and the independent directors who supported Wilson are said not to have been so admiring of Armer's presentation skills. That's something which is of importance not only when it comes to fronting a vociferous group of farmer shareholders but also in maintaining market confidence with investors who will be injecting capital into the company. Wilson was thought to be better at this.
Armer's supporters believed he had a stronger commercial focus (pointing to his $200 million dairy empire) and a desire to push the company faster up the value chain, along with the claim that he had more respect from farmer shareholders and was more ambitious for Fonterra than Wilson.
The suspicion that Wilson is "Henry's man" (he was effectively blooded during the capital restructuring process when he fronted up with van der Heyden and Spierings to farmer meetings) has also been cited by the Armer camp.
The September 27 announcement confirming van der Heyden would stay on as a farmer-elected director was instructive. Wilson said van der Heyden would stay on for the first part of the year. Waters would also extend his tenure "for up to six months" beyond the December AGM.
Wilson played up the need for continuity as the co-op moved ahead with the Taf. "As a result both Henry and Ralph have agreed to stay on until after Taf is up and running. They will provide valuable guidance during this period. Their involvement is in the best interests of the co-operative and the board has thanked them both for being flexible."
Wilson said Waters' extended appointment would need to be ratified by farmer shareholders at the AGM. The process to identify a new appointed director was already under way.
"Sir Henry would remain on as part of his normal farmer-elected term which runs to the annual meeting in 2013," said Wilson. "However, neither Henry nor I think it will be necessary for him to stay this long. He has made other professional and personal commitments that he is keen to pursue as soon as possible."
The lack of certainty over the departure dates of van der Heyden and Waters makes Wilson's position look weak.
The board has other strong independent directors such as David Jackson, Sir Ralph Norris and John Waller who should be able to give commercial ballast.
Wilson has also been on the Fonterra board since 2003 - so he is hardly a neophyte.
A confident incoming chairman would quickly set firm departure dates. Anything otherwise makes it look as though Wilson needs Waters and van der Heyden to make up numbers around the table to strengthen his position.