At the special meeting on Friday, shareholders voted on reducing the 13-member board to 11 directors and replacing direct farmer voting for farmer-director candidates with ratification voting at the end of a background nomination and selection process by an "independent" panel.
Farmers of New Zealand operations director Bill Guest said the move would take away the rights of Fonterra's dairy farmer owners to nominate and support candidates of their choice.
"It's also flawed because, after a director has served three terms, the board wants to decide if he or she should offer themselves for re-election."
Mr Guest said he was thankful the vote had failed because the governance model was taking away farmers' rights and detaching the administration of Fonterra from its owner-shareholders.
Hokianga dairy farmer Les King voted against the governance model because he was concerned there had not been sufficient farmer input.
"I went to a few meetings and was fairly satisfied with what I heard, but the last thing we want to do is reduce farmer influence on that board," he said.
"Also, the new process to select directors is convoluted. Discussions I had with people indicated they were not ready for it."
Mr King said he had no concerns about the abilities of the CEO or directors and expected to support a revised proposal "as long as we can have our say."
Northland Federated Farmers dairy section chairman Ashley Cullen voted against the governance recommendation because it "gave away too many rights".
"They were trying to push too many ideas through under one vote.
"I think it was for the best that it was voted down. They have got to come up with a better model than the one we considered last week."
Fonterra chairman John Wilson said that this was the co-operative working as it should.
"We asked our farmers to consider significant changes to the process for electing directors. A strong majority - almost two-thirds - voted in favour of the recommendation," he said.
"They want a system that gets the most knowledgeable and skilled candidates on to the board, and a process that encourages diversity and sees our most capable farmer shareholders put themselves forward.
"The fact that we didn't achieve the 75per cent tells us that the change proposed was a big ask, particularly around the change from being able to choose from any and all candidates. The board respects that view."
Mr Wilson said the governance and representation review had been a rigorous and positive process for the co-operative. It was important that the Fonterra remained focused on strengthening its governance and representation model.
"We owe it to our farmers and to New Zealand to move this co-operative forward by developing a model that gets the best possible talent onto the board in the future.
I am confident we can develop a solution which secures a mandate," he said.
