Structure dilutes responsibility

Fonterra’s business structure makes it prone to management failure as the co-operative model dilutes executive accountability: it’s harder to get rid of the executive as farmer shareholders derive their livelihoods from the co-op: they are less inclined to criticise or take a stand.

External shareholders would have demanded the immediate removal of the chairman and CEO after the China Beingmate investment disaster, where oversight and robust due diligence were severely lacking.

The appointment of a highly paid Dutchman was always going to be controversial, especially when you have weak and ineffective independent directors.

The quality of New Zealand’s listed company executives is pretty poor, tired and still very much ‘‘old boy’’, resulting in underperforming companies which fail to reinvest sufficient funds in their own firms or which do not pay an appropriate regionally weighted living wage to their workers.

The gross imbalance between executive remuneration and average worker will get worse until shareholders and fund managers, often benign in their proxy voting responsibilities, take action.

The grossly inflated prices of shares on the NZX, driven by and large by Australian investment managers who fail to take activist action against weak and incompetent boards, are why New Zealand’s productivity is going backwards. Guy Dobson, Levin

Fonterra chairman John Wilson at the company’s Te Rapa plant. The company’s co-operative model makes it harder to get rid of the executive, a letter writer says.