The Fonterra Shareholders' Council says many farmers think the board and management of the dairy giant are out of touch with its farmer base.
Last November Fonterra launched capital restructure plans to ensure funds for global growth, with the preferred model to give up some ownership and setup a new asset-holding company listed on the stock market.
The process stalled in February after it appeared farmers were unlikely to support the preferred option.
The council said yesterday in its annual report that it had received nearly 1000 submissions on the capital restructure process.
"Many respondents questioned the wisdom of opening up the co-operative to non-supplying shareholders whose investment objectives and investment horizons are likely to differ from those of farmers," the report said.
"A notable number of respondents commented that the board and management appear to be increasingly disconnected from the farmer base."
However, council chairman Blue Read said it supported Fonterra's strategy and was working with the board to find the right capital structure solutions for shareholders and the co-operative.
"It is now imperative that the focus shifts to moving the co-operative forward," Read said. "The Capital Structure Review process highlighted a number of shortcomings. However, these have been acknowledged and this should stand our co-operative in better stead to address important change in the future."
Fonterra had delivered a record payout and revenue and exceeded a value add earnings target, although share value had fallen and it had missed targets for total shareholder return and return on net assets.
Fonterra chairman Henry van der Heyden said it had been an exceptionally good year in terms of payout but there was room for continuous improvement.
The report said the issues the review of the capital structure sought to address of redemption risk, capital for growth and investment choice were still valid.
"This will be a key focus for board, council, management and our farmers in the year ahead," van der Heyden said.
