Fonterra's owners uneasy about chairman change handling

New Fonterra chairman John Monaghan stepped into the role following the surprise departure of John Wilson due to a health scare. Photo/File.

New Fonterra chairman John Monaghan will chair his first board meeting in the job tomorrow as questions persist about governance quality around the sudden change at the top table of New Zealand's biggest company.

Fonterra's announcement on July 27 that chairman John Wilson had stood down with immediate effect as "he recovers from a recent serious health scare" and "significant surgery" within the past month, surprised the dairy cooperative's supplying shareholders and the sharemarket.

Monaghan, a farmer-elected Fonterra director since 2008, was named to take over from the embattled Wilson who was criticised by the Beehive recently for Fonterra's heavy capital investment losses in China.

While Fonterra is not a public company it offers listed investment units to the public.

Experienced sharemarket company directors have told the Herald normal practice in the case of serious illness of a chairperson or chief executive would be a market announcement at the time.

"I would have thought for any company with a high profile and national significance that a market announcement to that effect would be made," said one.

Another said it seemed odd that Wilson had had surgery and was getting treatment but that was the first the market knew of it.

The Fonterra Shareholders' Council, which represents Fonterra's 10,000-or so supplier-owners, learned the day before the announcement that Wilson was stepping down, council leader Duncan Coull has said.

Meanwhile, influential shareholders continue to agitate about the timing of the announcement, four days after nominations closed for upcoming director elections.

Wilson was due to retire under rotation this year. He did not reveal if he would be standing again before the health issue announcement.

Shareholders who contacted the Herald said the look of nominations could have been different if the shareholder base had known Wilson's position earlier.

However, under Fonterra's two types of nomination process, farmer-shareholders can until September 20 put their names forward for election under the "self-nomination process".

Directors seeking re-election usually choose the other "independent nomination process" which closed on July 23.

Asked why no earlier notice had been given of Wilson's health issue to shareholders and the market, Fonterra said in a statement it was "difficult to answer" the Herald's questions while protecting Wilson's right to privacy.

The timing of Wilson's serious health scare was totally outside his control, the company said.

"After considering the advice of his medical team and consulting his family and the board, Mr Wilson made the decision to step down as chairman. At the earliest possible opportunity after Mr Wilson advised the board of his decision...(when the NZX opened the next day) Fonterra advised the market."

Fonterra argued that under its election candidate confidentiality policy, shareholders would not have known until later this year if Wilson was going to stand again or not anyway.

"At no point are they told who else is standing in the process - this includes whether sitting directors intend to re-stand."

Fonterra's chief executive Theo Spierings leaves the company later this year.