Friday, March 29, 2024

Culture, succession under study

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Fonterra Shareholders’ Council (FSC) is developing a governance dashboard that will include measures such as culture and succession as a means to help it monitor the performance of Fonterra’s board.
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It’s also proposed the co-op’s board, within the governance and representation review (Dairy Exporter, November, page 11), establishes an ethics committee to receive complaints and regulate the conduct of directors, particularly during the election process.

The moves are detailed in the FSC’s annual report sent to shareholders recently.

FSC governance and ethics committee chair Bill Millar said in the report the committee had been working with the board and management to develop the governance dashboard, which was likely to be operating within a year. The board’s future focus, how it approached opportunities and risks, compliance, the skills its board members had and how it measured up on other key performance indicators would also be examined in the dashboard.

FSC chair Ian Brown said the council had engaged specialist governance consultancy firm Westlake Governance to help determine some of the metrics useful in assessing performance, particularly for those less-tangible factors such as culture. Staff retention or shareholder loyalty could give some indication of culture, he said.

In the report the FSC said Fonterra now processed 89% of the country’s milk, down from about 96% in 2001, but the loss of suppliers had slowed over the past three seasons. Brown said the data was still concerning and it was important for not only the health of the co-op but New Zealand as a whole that Fonterra remained big and strong.

Other factors, such as a soaring share price, would have played a part in the loss of suppliers around 2006 and a close eye would have to be kept on what behaviour could be driven by changes in share price now trading among farmers (TAF) had been launched.

Brown said exactly how the dashboard measures would be reported back to shareholders was yet to be worked out but could take a traffic light-type form, with green, amber and red indicators.

The FSC’s governance and ethics committee also oversees Fonterra’s director election process and following issues brought to light at last year’s election some modifications to the process have been put in place for the current voting round. Some revolve around only one director coming from a jointly owned, multi-shareholder, supplying company to ensure one commercial organisation or entity is not over-represented at board level. The changes appear to relate to NZ-based farming entities only and not overseas investments, an important point given retiring chair Sir Henry van der Heyden, who also sits on the Fonterra director candidate assessment panel (CAP), and current director candidate Michael Spaans are both investors in Pascaro Investments and Chile-based Manuka.

If a candidate shares a common interest in an entity with a board member or fellow candidates the FSC has asked for this to be included in the candidate’s interest statement sent to shareholders.

The FSC also suggests the Fonterra board, within the governance and representation review, establishes an ethics committee to receive complaints and regulate the conduct of directors, particularly during director elections. The FSC suggests a joint review of the CAP be undertaken by the board and FSC as part of the review but it’s understood a final decision hasn’t been made yet. Brown said the FSC had not received any complaints that gave it cause for major concern over CAP. This year the CAP panel has a new independent chair in Bill Falconer, a professional company director with more than 25 years’ experience.

The FSC has called on the returning officer to travel with the candidates on their roadshow as required and for candidate presentations to be recorded at one of the roadshow meetings and posted on Fencepost.

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