Survey cuts to bone after Fonterra council burns $50m
After costing Fonterra farmers $50 million with little to show for it, the Fonterra Shareholders’ Council may finally have got the message its time is up, say critics.
Waikato shareholder Trevor Simpson is among the fiercest critics of the performance of the 20-yearold Fonterra shareholder watchdog, but is comforted by the tone of the council’s self-review so far.
“They’ve asked some very hard questions of themselves” in a survey of farmers, he said. “I was impressed. If ever a list said it was time for a change, this is the list.”
The survey of 10,000 or so shareholders and sharemilkers received 1400 responses.
Questions asked them to respond on a scale of 1 to 10, and allowed unlimited additional comment.
No questions were asked about the cost of the council, said its chairman James Barron. The council’s budget for this year is $3.2m.
Its annual budget, which farmers are asked to approve at every Fonterra AGM, has rarely dipped below this level, but until Fonterra’s financial performance started to fray, shareholders batted away journalist questions about the cost of the council, saying it was a tiny percentage of their milk payout.
The council was created in 2001 when farmer-owned Fonterra was formed under special legislation from an industry megamerger. The council was to be a watchdog for the cooperative’s 10,000-odd shareholders but gripes that it is more a lapdog for the Fonterra board have grown in recent years.
Fonterra’s FY19 net loss of $605m on asset writedowns of $826m brought the dissatisfaction to a head, inflamed by the council noting shareholders had experienced around $4 billion in wealth destruction in the past two financial years.
The council narrowly beat off two shareholder remit efforts to put it under a microscope at Fonterra’s annual meeting in November with a preemptive strike announcing it would conduct an independent review of itself.
Simpson was among the challengers who want the council scrapped.
The upshot has been the formation of a review group. It comprises four farmer shareholders selected by Barron from 22 nominations, two Fonterra directors and two councillors. These eight appointed James Buwalda, a former scientist and senior public service executive as independent chairman.
The review is due to report to shareholders in August — providing Covid19 doesn’t slow it down.