Fonterra plans early pasture for farmer directors

By PHILIPPA STEVENSON

Fonterra is proposing to boost the number of commercial directors on its board and to make an early cut to the number of farmer representatives.

The changes are aimed at addressing the governance issues raised by the resignation of Mike Smith in January.

Smith caused a furore over the $12 billion company's governance with his shock resignation and claim that the company's performance would suffer without boardroom changes.

The independent director had served barely four months on the board.

Fonterra chairman John Roadley said in February that the 13-member board was too big and overly weighted with farmers, but he doubted farmers would want to cut their representation.

Now he is proposing that the six-month-old company change its constitution to increase appointed directors from three to four, and to make an early cut in the number of farmer directors from 10 to nine.

Farmer numbers on the board were due to shrink to nine after the company had held its second annual meeting in September next year.

The pre-emptive move, which requires the support of 75 per cent of shareholders and 50 per cent of the watchdog Shareholders' Council, is to be voted on at a special meeting in Christchurch in July.

It will make a busy year for Fonterra, which already has annually scheduled elections for three director positions and one Shareholders' Council ward under way.

They will be followed by the July meeting, an annual meeting in September and potentially another election among all farmer directors, to cut their number, before the end of the year.

The company must also fill the vacancy left by Smith.

Dairy Farmers of NZ national chairman Charlie Pedersen said the move to hasten the cut to farmer directors by a few months "may ring a few alarm bells".

It could signal that Smith's criticisms were close to the mark, he said.

Board candidate Malcolm Bailey said he supported the proposal but like other farmers questioned the process.

Some wondered about the necessity of a meeting in July when the annual meeting was less than two months later.

Another shareholder, who declined to be named, predicted that the board would encounter a "reasonable level of resistance".

He said that if farmer directors only needed time to gain experience the board could be advocating a permanent solution to a temporary problem.

Roadley told farmers in a newsletter this week that the proposal arose from a review of the company's governance, which included a board workshop on the topic in February.