Helen Clark: Fonterra director 'threw in the towel'

By PHILIPPA STEVENSON agricultural editor

Prime Minister Helen Clark yesterday spoke out in support of the troubled Fonterra board and criticised the independent director who is quitting.

Speaking after a cabinet briefing on Fonterra, she said the four-month-old company was making a big transition from two farmer co-ops and the statutory-backed, exporting Dairy Board and needed time to bed in.

She followed up with a shot at departing Fonterra director Mike Smith, saying that she was disappointed he had "thrown in the towel after four months."

"I think that Fonterra deserves a far fairer go than that.

"It is of enormous importance to the New Zealand economy and I believe it has a good chance of being very successful as the processing companies and the marketing board before it have been," she said.

The Agriculture Minister, Jim Sutton, briefed the cabinet on the $12 billion company's latest fracas, which was prompted by Mr Smith's resignation because of governance inadequacies.

Helen Clark said the company's difficulties appeared to stem from problems in combining the corporate culture familiar to most company directors with the culture arising from the dairy co-ops and the Dairy Board.

"You are bringing largely urban-based independent directors into quite a different environment and that is why I say this transition needs time to gel and time to bed in.

"I think it's unfortunate that someone has thrown in the towel after four months."

A lot was riding on directors' shoulders and Fonterra deserved a good start, Helen Clark said.

Mr Smith declined to comment on the Prime Minister's views but said he was happy that the issues he had raised were now being debated among farmer shareholders.

Mr Smith, who has spent more than 25 years on public company boards and was a long-serving Lion Nathan executive director, is regarded as a key to the formation of Fonterra. It is understood that he devoted at least half his working hours last year to his dairy industry directorships at New Zealand Dairy Group, RD1.com and Fonterra.

He has an interest in a dairy farm with his son.

A Waikato dairy farmer yesterday described herself as "gobsmacked" at his resignation.

"These problems have been going on for years and the directors have only told us what we want to hear," she said.

Act's commerce spokesman, Stephen Franks, said it was now up to shareholders to make sure their Fonterra giant was not becoming the monster mistake feared by its critics.

The former Securities Commission member said his experience suggested that a board having governance workshops had its eyes well off the ball.

"No amount of workshopping and facilitators and advisers and spin from Fonterra's massive PR machine will restore confidence, until shareholders know exactly what lies behind the tension."

Mr Franks offered to provide shareholders with a draft letter that they could use to demand answers from Fonterra's board.

Fonterra chairman John Roadley said yesterday that the company's directors were committed to working vigorously to establish a boardroom style that was appropriate for the company as it moved from "merger mode to fully operational mode".

He said suggestions of major governance or control problems at Fonterra were belied by its success to date.

Successes included pulling off the biggest and most complex merger in New Zealand business history, making good progress towards getting efficiency gains, making executive appointments and establishing major joint ventures and alliances with some of the world's leading dairy and food companies, such as Nestle, Dairy Farmers of America and Arla.

"Establishing the most appropriate boardroom style for our company at this stage of its development calls for cool heads and reflection," he said.

"We are fortunate that on the Fonterra board we have directors who are dedicated, competent and able to look forward.

"Shareholders can be assured that they will not tolerate corporate governance practices that lead to poor performance, conflicts that would be prejudicial to shareholder interests or behaviour that would damage our reputation or value."