Spring despairs over dairying restructure

By LIBBY MIDDLEBROOK

New Zealand Dairy Group's board restructuring proposal is seriously flawed and will inevitably weaken farmer control over the company, says former chairman Sir Dryden Spring.

The country's largest milk producer, New Zealand Dairy Group (NZDG), is proposing big changes to its governance structure, including reducing the number of elected farmer directors on its board from 15 to seven.

Sir Dryden, also a former New Zealand Dairy Board chairman, said farmers would lose influence over the way the co-operative was run and there was no evidence that "greenhorn" farmer directors were incapable of successfully running a large company.

The board would inevitably be less accountable to shareholders under the new governance structure.

"Without doubt, the proposals will weaken farmers' influence on the destiny of their co-operative and how it operates, thus in due course threatening their ownership control and ownership of it.

"There is no evidence that companies with small boards perform better than those with larger boards, nor is there any optimum board size."

NZDG's governance restructuring proposal, which will be put to a shareholder vote next week, includes increasing the number of appointed directors from two to three and abandoning its ward election system.

A 24-person elected shareholders' council would assume communication responsibilities between shareholders and the board and develop a long-term strategy for the board.

"Separation of governance and representation will result in inadequate understanding and consideration by directors, of farmer concerns and aspirations for their co-operative," said Sir Dryden, whose views are supported by NZDG director Keith Holmes.

Meanwhile, the chairwoman of the NZDG's governance and representation committee, Hilary Webber, defended the new governance structure recommendations.

She said that in line with most dairy co-operative boards around the world, a smaller board would make NZDG more efficient.

The 15-member board had become too bureaucratic and political and a downsized board with more appointed directors would improve its commercial focus.

A higher number of appointed directors could also bring ideas from outside the industry. "I believe it will significantly strengthen the co-operative. Farmers require one thing from their co-operative and that's money in their back pockets.

"If we can get the very best people on the board and less politics it will really improve the board performance."

Under the new governance structure, Ms Webber said, shareholders would have an important part to play - both on the board and on the shareholders' council, overseeing the direction of the board and signing off business transactions.