Fonterra's former chief executive Theo Spierings is in line for another payout under an historic incentive scheme, despite the co-operative racking up huge financial losses since his departure.
This is another dollop of salt into the wound for shareholders, who have witnessed billions of dollars of their capital wasted over the past decade.
According to Fonterra's last annual report there's still a portion outstanding from a scheme tied to a transformation programme called Velocity that covered Fonterra's 2016 and 2017 financial years when Spierings was at the helm.
Dutch-born Spierings left Fonterra in late 2018 after a seven-year stint that saw the dairy giant embark on an investment strategy many see as responsible for the poor financial performance of the last two years.
During his time Spierings collected around $38 million in remuneration, including incentives and bonus payments.
Fonterra is now forecasting a loss of between $590m and $675m in the financial year just ended on the back of asset writedowns totalling up to $860m.
That follows a $196m loss for the year to July 2018 on a 25 per cent decline in operating earnings and a $433m loss on an investment in Chinese company Beingmate.
Spierings collected $8m in 2018, adding to the $8.3m received in 2017, and looks set to be back for more this year. Of last year's payment, some $4.2m related to Velocity. The previous year it was $3.855m.
Fonterra's annual report notes there is a further final payment of 25 per cent of the 2017 Velocity Incentive (VLI) scheme due in 2019. However, it also notes the board retains overall discretion in relation to all aspects of the VLI.
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A Fonterra spokeswoman confirmed to the Herald there's still a deferred payment of 25 per cent but could not disclose the figure. Full details would be revealed in the 2019 annual report to be released in September, she said.
In my view Fonterra's board, led by chairman John Monaghan, should have no hesitation in exercising its discretion and withholding payment. The board should also take the axe to the co-operative's flawed executive remuneration system.
This has long been a bone of contention for Fonterra's dairy farmer suppliers and more recently investors in the Shareholders Fund. Spierings' predecessor, Canadian-born Andrew Ferrier, took home around $40m from his eight-year stint at the top of New Zealand's largest company.
Fonterra's last annual report states in 2017 Velocity delivered "significant benefits" across the farmgate milk price, earnings and working capital in 2016 and 2017.
While the farm gate milk price has maintained a relatively high level, Fonterra's own financial position and balance sheet has imploded.
Miles Hurrell, the new chief executive, has embarked on an asset review programme to reduce debt and is leaving "no stone unturned" in an effort to turn Fonterra's performance around.
The bulk of the accounting adjustments relate to non-cash impairment charges on four specific assets and the divestments already made this year.
In other words, the investments that management have been heavily incentivised for since Fonterra was established have turned out to cost the dairy giant billions.
It's interesting to note that some of Fonterra's executive incentive targets, while until recently not specified, relate to surveys developed by consulting firms McKinsey and Gallup.
For example, Velocity apparently delivered a material uplift in Fonterra's organisational health and employee engagement as measured by those two firms.
Fonterra has since moved to a "more traditional" incentive programme directly aligned to the co-operative's performance and returns to farmer shareholders, according to its annual report.
So, by its own admission, Fonterra's payouts to its former CEO were not directly tied to performance and shareholder return.
Little wonder Fonterra is in the perilous position its now in.
Its asset sale programme has been described as a fire sale, while even more concerning is that the performance of its New Zealand consumer business and Australian ingredients businesses – held up as value-oriented businesses - have deteriorated.
In Hurrell Fonterra finally has a chief executive willing to dig in and do the hard yards.
But in order to address the deep-seated issues affecting Fonterra, the board should start with the absurd incentive schemes that reward poor performance over shareholder capital return.