KEY POINTS:
Battle lines are being drawn over a possible Fonterra listing after an academic yesterday warned dairy farmers a full public float could cost them control of their livelihood.
Former Canterbury University accountancy senior lecturer Alan Robb also said farmers could be pressured into listing the co-op by consultants
hoping to earn fat advisory fees.
But his words drew a quickfire response from Fonterra chairman Henry van der Heyden, who accused Robb of grandstanding.
"Alan Robb loves to get his name in the headlines and this is just another example of that," he said.
Robb's warning came at the Dairy Farmers of New Zealand conference in Auckland yesterday.
Only suppliers can hold shares in Fonterra, and its payout is generally at a standard level for all farmers.
Robb said benefits promised to members of demutualised businesses rarely happened.
"From studies of demutualisations it is very clear that the beneficiaries are invariably the consultants, closely followed by the managers."
Fonterra is conducting a capital structure review that may lead to a full or partial public listing of its shares.
Options are to be put to farmers this year.
Robb said members' commitment to co-operative principles and values was Fonterra's greatest strength and helped ensure a fair deal for suppliers.
"Co-operatives were formed in times of unbridled free markets to ensure that people and the environment did not take second place to the interests of financial capital.
"That safeguard is as important today as it was in Victorian times."
He said van der Heyden and Fonterra chief executive Andrew Ferrier had commented publicly on the importance of the co-operative, but one Fonterra executive had said recently there was no reason to believe any structure was "inherently superior" to another.
Robb also said it was "anomalous" for van der Heyden to espouse co-operative values but also sit on the board of the NZX "an organisation designed to advance the interests of financial capital".
He listed consultants promoting demutualisation as one of four key threats faced by the co-op.
Claims that co-ops and other mutual organisations would be starved of capital for expansion were often made by those "selling" demutualisation.
"The evidence is that most co-operatives which have demutualised have not sought capital afterwards.
"Frequently they have been taken over and asset-stripped by predators."
Robb said a "hybrid" share structure - in which some shares were owned co-operatively by farmers, and others were publicly available - would create tensions.
"Some members will expect a maximisation of profits, others a maximum return for suppliers."
But Robb believed there would be "real pressure" for full demutualisation.
"This pressure will come from professional advisers who see high fees to be earned or who are ideologically committed to 'market efficiency' dogma. It will come from directors who do not understand co-operative principles and values."
Van der Heyden said yesterday his only role at the NZX was as a governor of the stock exchange's business.
Robb's warnings were premature, as no firm proposals for change had been put to farmers, and van der Heyden believed farmer control of the co-op would remain non-negotiable.
But Waikato Federated Farmers president Peter Buckley said farmers were concerned about the issue.
Many he had spoken to were against opening up share ownership to outsiders as they did not want to lose control.
"They would sooner be able to keep it themselves," he said.
Several delegates to the dairy farmer conference said privately before Robb's speech that they were also concerned at the possibility of consultants with vested financial interests encouraging a listing.
Buckley said a few farmers had raised the idea of being able to sell shares in the value-added part of the business to fellow co-op members.
The value-added part of the business covers returns from activities such as consumer products and farmers have been dissatisfied with the level of these returns.
