Fonterra looked at potential chief executives on both sides of the Tasman and checked back on the short list from its previous global search before settling on interim boss Miles Hurrell as its new chief executive, says chairman John Monaghan.
Hurrell, a Kiwi and long-time employee, has been helping steer New Zealand's biggest company out of stormy financial waters for six months and has been announced as the permanent appointment on a base annual salary of $1.95 million.
Depending on his performance, he is in line for additional short and long-term incentive payments as agreed with the board.
Fonterra's previous chief executive, Dutchman Theo Spierings took home $8m in the 2017 financial year. His base salary in 2017 and 2018 was $2.46m.
Monaghan, Fonterra's longest serving director but also relatively new to the job after succeeding former chairman, the late John Wilson, soon after Spierings exit mid-last year, said he wanted to release Hurrell's base salary in keeping with the new leadership's commitment to be transparent.
Hurrell's appointment to the top job came on the heels of international credit ratings agency Fitch putting Fonterra on notice over its credit rating and downgrading the outlook on Fonterra's 'A' lon-term issuer default rating to 'negative' from a previous 'stable' outlook.
Fonterra last year posted a historic first annual net loss - of $196m - and debt of $6.2 billion. Last week it announced an increase in milk price to its farmer-suppliers but revised its forecast earnings down to 15-25c per share. It also said it would not be paying an interim dividend this month and a decision on a full year dividend depended on full year earnings and balance sheet position.
Its share price slumped to $4.20 after the announcement. Last year it lost more than 20 per cent on the back of bad news about overseas investments and the financial result.
The share price closed at $4.30 after news of Hurrell's permanent appointment.
On Fitch's announcement, Monaghan said he was "almost expecting it".
"We have made some announcements about what we are doing to improve our financial position - they will be watching us until we deliver against those statements we have made."
Questioned by the Heraldon whether Hurrell's base pay was lower because of Fonterra's stretched balance sheet, Monaghan said "no, it is commensurate with the job in a New Zealand dairy farmers' co-op".
Fonterra is owned by about 10,000 dairy farmer shareholders. It offers listed units in farmer shares.
Monaghan said he had taken outside advice on the chief executive appointment.
"We haven't run a process but we scoped a range of CEOs particularly in Australasia... and we looked at who was on our short list from the global search - we were well-advanced with that.
"Given what our agenda is right now with the portfolio review and we've also announced we are looking at fundamental strategic change, Miles is the best placed person to lead all that. We (the board) have worked with him for six months and we're very pleased with what we have seen."
Fonterra called off its global search for a replacement for Spierings after declaring an historic first annual net loss of $196m last year and debt of $6.2 billion.
Fonterra announced a full review of its business and assets when its leadership changed.
It has since said it is also reviewing its business strategy, which presumably includes the previous regime's commitment to invest heavily overseas to build milk supply pools.
Monaghan said the company would make announcements on its review progress around March 20, when its interim results will be published.
He emphasised Fonterra's leaders were "looking at fundamental change".
"We are not tinkering at the edges."
Hurrell joined Fonterra in 2000.
Reaction from Fonterra's farmer-owners ranged from strong support for his appointment to disappointment.
Craigs Investment Partners' Mark Lister said Hurrell hadn't been in the job long enough to judge his performance.
"We haven't seen any progress from Fonterra but you can't blame Mr Hurrell for that. The jury is still out and it's far too early to judge his performance.
"I'm giving him the benefit of the doubt. There is definitely some value in appointing someone already there, someone who has come through the ranks from a more grassroots basis.
"But there will also be some who will say this is a company that's really lost its way and it really needs to do something dramatic to shake things up.
"However it would be unfair to have him as a caretaker for six months and then bring in some high flyer. The issues Fonterra has are bigger than just who is in the CEO's chair," Lister said.