Saturday, March 30, 2024

Bell-ringer with no regrets

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Retiring Fonterra Shareholders Council (FSC) member Philip van der Bijl has defended his decisions in backing trading among farmers (TAF). And he said few people realised just how much effort councillors had put into the new capital structure.
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The Southland farmer has been a member of the council since Fonterra’s formation and was a member of New Zealand Dairy Group’s (NZDG) shareholders’ council for almost two years before the mega-merger between NZDG, Kiwi Dairies and the Dairy Board to form Fonterra.

He said around May 15 this year he sent an email to his fellow FSC members advising them he would have to vote against TAF because he believed the dry share limit of 25% of total shares on offer was too high.

Other councillors also held fears and after discussions with the Fonterra board and management the new fund risk management policy with lower dry share limits was established.

“We were bound by confidentiality but I can tell you we were asking a lot of hard questions and yes, I think the board would have been more liberal in TAF without the council,” he said.

Big changes came in the last three to four weeks leading up to the June 25 special meeting.
But he believed that in the end the TAF structure was a sound one for the cooperative.

“Of course it would have been nice to have a nominal share value but the Government was never going to let us have that.”

Given fair entry and exit was required by the Government, TAF was the next best option.

“Between the board and council we have the best set-up in the world and it’s been fabulous how the board has worked with us to get to the end point.”

But van der Bijl highlighted the fact that although the council and board had a signed agreement through a deed poll that TAF is to be run according to the requirements set out in failed resolution two, the most important thing farmers could now do was to lock those changes in and vote in favour of the resolution when it is re-put to the annual meeting later this month.

The resolution reduces the dry share limit from 25% to 15% of total shares on issue and reduces the threshold on fund size from 25% to 20%.

It also puts a 33% cap on wet share economic rights a farmer can sell into the fund.

Importantly the resolution also enshrines further constitutional protections for milk price, requiring a milk price panel and setting out the condition that the FSC must appoint two members (one must be independent) of the five-person milk price panel.

“I don’t think people understood what they were doing when they voted no for resolution two,” he said.
The FSC’s role has developed over the years and is now entering a phase where it will act as a watchdog for the cooperative through its monitoring and consultative functions as TAF proceeds.

“The role had already developed into one of communicating on behalf of the board back to farmers and vice versa so the board can get on with governing the cooperative. That role will continue but the biggest challenges going forward are going to be in appointing people to the milk price panel and monitoring the fund size,” he said.

Under the fund risk management policy the board is required to consult with the FSC once certain trigger levels are met in terms of fund size and the FSC will bear a big responsibility to all co-op members in performing that role, he said.

That’s why it’s important the FSC is well funded, to ensure it can afford to get independent specialist advice as it’s needed.

Ideal candidates

Another role the FSC already has is overseeing the candidate assessment panel (CAP) process for Fonterra director elections.

Van der Bijl said that while the CAP process is good in theory he questions whether hands-on, practical farmers are penalised by the assessment and reporting system.

“I’m nervous that we’re tending to get people who, while they have some ownership in a farm, may have never milked a cow in their life and don’t have a strong understanding of what’s important for a farmer.
“They’re really more like an appointed director but where we need those specific skills we can get them from appointed people,” he said.

As Fonterra enters the TAF era the need for well-grounded farmer-directors becomes even more important.

At times in past years the FSC has been scathing of Fonterra’s performance, highlighting its shortcomings to farmers in its annual review of how the co-op has measured up against its own goals. While the FSC wasn’t meant to get into Fonterra’s “gearbox” it did have an important job to do in its review, van der Bijl said.

The FSC will continue with that role but under TAF more scrutiny will come from outside investors and Fonterra’s activities will be put under a lot more microscopes.

Van der Bijl said it had sometimes been hard in the earlier days to get financial information out of the board. At times tension between the board and FSC had reached boiling point, even requiring outside mediation to get their two leaders back on reasonable working terms.

Van der Bijl’s not prepared to “tell tales out of school” on what’s gone on behind closed doors over TAF debates, who couldn’t back it or what went on with leadership coups and subsequent vying for the chair role. The council, like the board, hadn’t been without its “politicking”.

Van der Bijl didn’t think it had been in Fonterra’s best interests to start the mega co-op off with directors coming from both of its legacy cooperatives.

“We were told that was necessary to keep continuity but looking back it would have been better to have an election right from the start and just get the people who were right for the job; that way we wouldn’t have had people coming on who might have felt they owed something to their mates.”

Van der Bijl said the almost 13 years he spent as a councillor were certainly eventful.

He came to New Zealand in 1962 from the Netherlands as a “£10 immigrant” to fulfil his dream of becoming a farmer. Both his parents were doctors and at the time the 18-year-old knew he had no chance of owning a farm in Holland.

Four years later he’d met his wife, Denise and thanks to the backing of the Rural Bank and a State Advances loan they were able to go sharemilking 125 cows in Warkworth. In 1970 while they were still sharemilking he stood as a director of the failing Albertland dairy co-op at Te Hana.

“I didn’t get in which was a good thing,” he said. “I’d probably still be milking 200 cows.”

Instead he threw his energies into growing his business while still keeping an interest in dairy industry governance.

The couple bought their first farm in 1974 and after nine years sold it, eventually buying another property near Reporoa. By 1992 and with three children they looked to Southland for growth opportunities and found it in a 1330ha rough block 17km south of Mossburn in country people warned them they wouldn’t be able to milk cows on.

It was pioneering work but they now have an 800ha milking platform and milk 1600 cows through an 80-bail rotary farm dairy with their daughter Yvonne and her husband John Lange.

Their latest investment is a $3.3 million wintering barn big enough to house 1000 cows on the Southland farm but they also have a family farm near Reporoa milking 1100 cows which is run by son Chris and his wife Trish.

Van Der Bijl will have a little more time now to help out on the farm but as he approaches his 70th birthday he can feel pretty comfortable that he’s given plenty back to the industry.

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