The co-operative will hold a special meeting on June 10 in Hamilton to amend its constitution allowing it to cut the board to 11 from 13 and introduce a new system to elect farmer directors.
Some farmers have been lobbying for a smaller board and the proposed changes will see seven farmer directors and four independents, compared to the nine farmers and four independents now. The chairman would be elected by the board and would have to be a farmer director.
The new voting process for farmer directors would ditch the single transferable voting system, which had been criticised for politicising elections, in favour of a nominations committee putting forward candidates who would need at least 50% support to join the board.
"If the co-operative is to move forward and stay focused on delivering wealth to its farmers every month of the year we need to move past the annual distraction of an electioneering process," chairman John Wilson said in a letter to farmers.
"The recommendation has unanimous support from the board. It also has strong majority support from your shareholders' council."
A majority of Fonterra’s farmer shareholders supported a proposal from fellow shareholders and former directors Colin Armer and Greg Gent to reduce the board to nine at the annual meeting last October but the vote fell short of the 75% needed and of the required 50% support of the shareholders’ council.
It backed the board’s view that a better option was to make any changes through the governance review that started in 2013 and was stalled until shareholders started agitating for change last year.
The recommendations were also backed by an independent expert panel comprised of former Fonterra deputy chief executive Chris Moller, professional director Therese Walsh, United States academic Michael Cook and Dutch dairy co-operative specialist Adrie Zwaneenberg.
The panel was divided in some areas, such as the need for the chairman to be a farmer director, with two members saying it was best practice for the chairman to be elected solely on merit and that candidate participation in shareholder meetings could deter high-quality independent directors from putting themselves forward.
The panel also said the required onfarm dairy experience for farmer directors should be assessed as a collective rather than individual basis and that the requirement for that experience to have been as a Fonterra shareholder "could unnecessarily reduce the pool of potential candidates".
If the proposals got the 75% support required, the board would be reduced over the next two years while a review of the shareholders' council would be shared with farmers at the 2016 annual meeting. – BusinessDesk.
