Fonterra boss Theo Spierings has consolidated his powerbase at the dairy co-operative with chairman John Wilson's emailed statement to shareholders that the board has confidence in the way the chief executive is handling the tainted whey protein affair.

The brutal truth is that long-time senior executive Gary Romano - who ran the New Zealand operation - had already offered himself up as the sacrificial lamb.

Romano's resignation came before the various inquiry teams had even started delving into who to blame for the late discovery of "clostridium" in a batch of whey protein which had been made into infant formula and other products.

Since then two other executives have been put on leave - a clear indication that Fonterra already has a good idea where the buck will stop on this fiasco.


So, Spierings is secure. But the pressure is on him to get Fonterra into shape fast.

In a Monday memo, he told staff he aimed to "reset the business" and build a culture of "accountability and openness".

"At the centre of this is greater transparency," he said.

It's a moot point that a company of Fonterra's size which promotes itself as a world leader in producing high-quality proteins should already have such traits, particularly given it had been embroiled in an earlier food scare where the presence of agricultural chemical DCD in milk powder was not escalated to senior management levels in a timely fashion.

Fonterra argues black and blue that there was no potential for harm from the minute amounts of DCD in its base product. But perception overrides reality when it comes to food safety - something the co-operative has been slow to learn.

The emails emanating from Spierings' suite in Auckland indicate there is considerable work to do to implement the new back-to-basics approach.

Last week, the chief executive focused staff attention on a values statement which said all the right things but missed the crucial operational steps.

Monday's missive was focused on the first steps towards transforming the organisation. It was all about taking stock, running the co-operative at a critical time and getting back to basics.


There are three main priorities between now and the end of the year:

Keeping the business running and the milk flowing.

Mobilising the office of the CEO to lead the recovery programme and to drive fundamental and significant cultural change across the co-op.

Conducting an operational review to learn what happened and why, and how to prevent it happening again.

To get this moving Spierings has established a team of eight senior leaders, representing different parts of the business, who will meet twice a week to focus on managing each area of the business and day-to-day operations.

They are Kelvin Wickham (greater China and India), Alex Turnbull (Latin America), Johan Priem (Southeast Asia and Indian subcontinent, Middle East-Africa), Judith Swales (Australia), Peter McClure (Fonterra Brands NZ), Robert Spurway and Tim Deane (New Zealand Milk Products), and Chris Caldwell (people, culture and services, and finance and human resources for NZMP).

Lukas Paravicini (chief financial officer) and Jacqueline Chow (global brands and nutrition) will be part of this group when they join Fonterra and, until then, Caldwell will cover their responsibilities.

Team members will continue to manage their own areas of responsibility and, in addition, will work collectively to provide stability and continuity within operations and geographical areas.

The office of the CEO has also been expanded, with the executives' remit to drive change and rebuild reputation.

The executives group reports directly to Spierings and is meeting daily. It comprises Ian Palliser (food safety and quality), Caldwell (people, culture and services, finance, and global brands and nutrition), Maury Leyland (recovery team and strategy), Todd Muller (co-operative affairs), Kerry Underhill (communications), Paul Campbell (recovery team), Abhy Maharaj (investor relations), and Sandy McLay (office of the chairman and chief executive).

This team is expected to work closely with the business leadership team with Caldwell and Spierings providing a bridge.

Meanwhile the internal operational review is running in parallel with Leyland leading a group looking at Fonterra's business processes, information and traceability systems and ways of work, including decision-making processes.

"This review will be completed by the end of the month and we will share key findings so we can all understand what happened and ensure it doesn't happen again," Spierings said.

He has told staff the company needs to face up to its failings, learn from them, and "put in place new ways of working that will put us back in the lead".

"We need to earn the right to say we are the best dairy company in the world and we need to re-establish the utmost confidence and trust in our people and our products and, ultimately, restore the reputation of our co-operative."

In his note to farmer shareholders, Wilson said the board had "confidence in Theo's handling of this situation".

"He has our total support and he is ensuring that actions are taken to create opportunities from this crisis to safeguard our future business," he said.

Wilson also included a copy of an earlier email Spierings sent to staff under the headline "Living our values - our foundation and our future".

In this email, the chief executive said: "There were some of the toughest days that our co-operative, and I myself, have experienced.

"Situations like this test us all. They test our values and commitment, our energy, and our integrity. They test the very foundations of our business.

"We now find ourselves at the beginning of a journey to rebuild trust and confidence among ourselves, our farmers, customers, Governments, investors and the public, and in our operations and products.

"I believe we did the right things, but didn't always get things right."

Rebuilding internal trust is important as there will be many Fonterra employees dismayed at the affair and the damage the company's reputation has suffered.

The government inquiry announced this week seems a soft-pedal affair. The ground will move quickly, so it is important Fonterra does learn the lessons.

Time will tell.