Fonterra's annual meeting attracted a small turnout in Canterbury. Photo / Mark Mitchell
Fonterra's annual meeting attracted a small turnout in Canterbury. Photo / Mark Mitchell
Fonterra’s farmer owners have voted solidly in support of reducing the size of the dairy giant’s board of directors.
A board recommendation to Thursday’s annual shareholders meeting to reduce the number of directors from 11 to nine received 88.49 per cent support from those who voted.
Chairman Peter McBride saidFonterra, New Zealand’s biggest business, could now move into the 2024 director elections with certainty.
The transition to a board of nine, comprising six farmer-elected directors and three appointed by the board, would be completed in 12 months, at the 2024 annual meeting, he said.
McBride championed the director cut saying the board believed its priorities in coming years could be more efficiently delivered by a smaller board, while maintaining the balance between farmer-elected and appointed governors.
The chair of Fonterra will still be selected from farmer-elected directors at the top table.
Farmer watchdog, the Fonterra Cooperative Council, supported the reduction.
Fonterra chairman Peter McBride.
It has taken 21 years for Fonterra, formed from a massive industry merger in late 2001, to trim its weighty boards down to something approaching the Institute of Directors’ recommended board size of six to eight directors for medium to large companies.
McBride said Fonterra’s global scale had made it “an outlier”.
The company is responsible for the majority of the dairy industry’s $26 billion export earnings and is the world’s ninth-largest dairy company by revenue.
The vote on the director cut and the much-anticipated announcement of Fonterra’s on-farm emissions reduction target - 30 per cent across all farms between 2018 and 2030 - were the highlights of a sometimes testy, small annual gathering of farmer-shareholders in Canterbury.
Despite Fonterra’s strong FY23 financial result and earnings performance, some shareholders were unhappy with its connectivity with them and its responsiveness.
The farmer-elected shareholder council mirrored this unrest in its recent annual report, in which it took Fonterra to task for lack of information about a slew of new investments, and for throwing its weight around in on-farm matters.
Chief executive Miles Hurrell fended off the likelihood of uncomfortable shareholder questions over lunch with a short nod in his presentation to the sudden departure this month of short-serving chief financial officer Neil Beaumont.
However, there could be a clue in what he said to explain the reason for Beaumont’s abrupt resignation.
“While the terms of Neil’s exit are confidential, I can confirm that his departure was mutually agreed ... and was not in any way linked to the co-op’s financial performance.
“While he was with us Neil created some real momentum in terms of how we set and achieve our goals for 2030, including the resource allocation network, two additional efficiency metrics and cost-reduction targets we have added to our performance framework.
“I am determined this momentum will continue,“ Hurrell told the meeting.
The emphasis on “momentum” may serve to confirm speculation Beaumont was disconnected from Fonterra’s HQ culture, which he may have found ill-suited to an aggressive corporate pursuit of targets due to its farmer ownership.
Only one shareholder asked about Beaumont’s departure and why its terms were confidential. Hurrell repeated that they were.
Fonterra chief executive Miles Hurrell. Photo / Dean Purcell
And despite tough times on the farm due to the global milk price downturn, high interest rates and cost inflation, only one shareholder challenged a proposal to pay McBride and directors more amid an economic crunch.
Shareholders voted 76.1 per cent in support of a $14,000 pay rise for McBride, which takes his annual remuneration to $484,000, and for an increase of $5000 to $196,500 for elected directors. Watchdog farmer-councillors were also approved for a pay rise.
Also approved by more than 90 per cent were changes to the composition of the independent milk price panel who recommend a base milk price to Fonterra.
Fonterra collects around 78 per cent of the country’s raw milk production and is regulated by industry legislation. The changes were required by the former Government as a trade-off for its approval for changes to the Dairy Industry Restructuring Act to allow Fonterra to implement a capital restructure this year.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
