“If the farm doesn’t have a board of directors, having an advisory board is a step up from just having mum and dad, the farm owners, running the business.
“A lot of farmers won’t need or want a board of directors but what they do need is possibly some guidance and support.”
He said an advisory board could meet every fortnight or maybe only every second month and could exist for only six months, or a year or as long as needed.
“An advisory board can do almost anything it likes. It is bound by a charter when it is set up, which gives it a terms of reference and keeps discussions confidential, but otherwise it is there to help the business.
“It might look at something like changing over from winter milk to spring lactation or another change in farm systems to make the business more viable or it might just keep an eye on what is happening on and off-farm and offer suggestions on how things can be done differently.”
Board members were usually people who had expertise in farm businesses such as accountants, farm advisers, lawyers and bankers as well as other farmers, he said. A mix of people was the best.
“The farm owners are also on it so they attend all the meetings and have to be willing to sit and listen to other board members’ opinions. They have to come to meetings with an open mind.”
However, he said an advisory board had no power to make decisions so farm owners didn’t have to agree with or follow the advice given.
As well, board members were not bound legally by financial responsibility in the way a board of directors was.
“Because of this people can be advisory board members because they want to help and they don’t have to worry about the risk to themselves and their own businesses.”
There were usually about four or five members but there were no rules.
“You need to have enough people to bring different views and ideas to the table but not too many that there are too many voices.”
He said advisory board members would expect to be paid but costs varied depending on how many times the advisory board met and how much work it was expected to do.
“It could be $1000 to $2000 or more per member per month but it depends on a whole lot of factors.
“In the end it has to be adding value to the business and not a cost to the business.
“The key is getting the right people on your advisory board, asking them the right questions and giving them the information they need on your farming business so they can offer the best advice.
“Good advisory boards can give fresh insights and high-quality objective advice to issues and problems that arise,” McAra said.
Introducing an advisory board at the very least ensured the farmer or business owner spent time on their business rather than in their business.
“With mounting pressure and heavy workloads sometimes it’s hard for farmers to get their head out of the grass and into the office.
“A good advisory board ensures farmers can take time to focus on key issues affecting their farming business,” he said.
The Institute of Directors and DairyNZ have collaborated to develop a due diligence guide for advisers to educate advisors and farm owners on advisory boards. The Institute of Directors also has an Advisory Board Toolkit on their website.
