Fonterra Shareholders’ Council chairman Duncan Coull said the proposal was more likely to be a refinement of the co-operative’s current model rather than a complete overhaul, and was being drawn up very much based on farmer input at a series of meetings held in February and March.
Somewhat surprisingly given the 53.8% vote last year in favour of reducing the board size from 13 to nine, board size hasn’t been a major discussion point at recent meetings.
Coull said there had been more discussion around the right mix between the numbers of independent and farmer-elected directors.
But the key themes to emerge from meeting rounds had centred on how to get the best possible people around the board table.
Farmers wanted better transparency in the performance of sitting board members and greater visibility around the skills and attributes both required on the board and held by sitting and prospective directors.
Farmers indicated they wanted an enhanced candidate assessment process so they could have more confidence in it.
Almost every year there are murmurings about the independence and accuracy of the candidate assessment panel (CAP) outputs with some farmer-shareholders seemingly ignoring the information and casting their vote based on other criteria or information.
Coull said when the farmers’ concerns with the CAP process were distilled they often came down to the fact the difference between governance and representation was not well-understood.
The booklet farmers received earlier this year was designed to lift understanding of that difference and the subsequent meetings have provided an opportunity for the council to lift farmer-shareholders’ understanding about the role the council played, Coull said.
“We needed to start at the beginning so people had a clear understanding of what we already have and then talk about what we need to improve on and what we need going forward so the co-operative really delivers on performance,” Coull said.
Close to 200 meetings had been held in two rounds. The first involved a smaller number of regional meetings where directors and councillors on the governance and review committee were present.
The second round, which included a large number of “shed meetings”, was run by councillors and Fonterra area managers.
There had been a good turn-out and farmers had come along with open minds and a willingness to look forward and be constructive, despite the stresses most were facing onfarm with the continuing low payout, Coull said.
Duncan Coull – farmers want more information to assess potential directors.
There was a challenge, though, in engaging the co-operative’s younger members in the discussion, which itself was part of the conversation at meetings.
“That was a common theme – we need to have a lot more effort put into making sure the next generation of leaders are groomed to take on governance and leadership roles in the co-operative,” Coull said.
There was little discussion about suppliers in other countries joining the co-operative.
“I think that in reality that’s something to be discussed at another time in the future,” Coull said.
Fonterra chairman John Wilson commended farmers on the high level of engagement in the governance and review process to date.
He agreed with Coull’s take on the key themes of the meetings and the discussion centring on quality rather than quantity.
“Farmers were focused on how to identify and select the best directors and the best councillors,” Wilson said.
There had been a good level of discussion on defining the role of the shareholders council and re-igniting its representation role.
When the council was set-up it had three major roles:
- Advocacy and representation
- Cornerstone shareholder
- Guardian of the constitution.
Since the co-operative and the council were established in 2001 a number of things had occupied farmers’ thinking and discussions and that had clouded the necessary separation of board and council roles.
The capital structure debate, which lasted close to four years, was one such discussion.
“I think farmers could be well-excused for not seeing clarity in the council’s roles so it’s been good to go back over these and talk about what’s expected,” Wilson said.
Having high-quality, effective representation and a council that was performing well across all three of those roles was just as important as having high-quality, effective governance for a large, complex co-operative business like Fonterra, he said.
So identifying and developing shareholders for a seat on the council was also extremely important.
“It was good to see there was a lot of discussion around passing the baton and bringing on the next generation of governors and councillors.
“We run a very good governance development programme but we have to work at identifying our best farmers to come through that.”
Farmers had different skill sets and areas they preferred so some would naturally be a better fit for governance while others were well-suited to roles within the council.
But both needed high-quality people, he said.
One of the questions asked of farmers was whether all farmer-directors should be elected or whether there was room for some to be appointed, just as independent directors were, based on their specific skill sets and what they could add to the board.
The next step in the governance and representation review process is to look at farmer feedback in the context of the recommendations arrived at in 2013 when a board and council-led committee first addressed the issue.
That review was put on hold as the co-operative dealt with the fall-out from what turned out to be a false botulinum scare.
Coull said a revised set of recommendations would be put in place based on farmer input, which would
then be put to the shareholder base in April.
Outside expertise won’t be used to define the new proposal but will be brought in to critique it once it’s presented to farmers.
Another round of meetings would be held to test farmers’ response and to seek further feedback before a final proposal was put to farmers at a special general meeting in May.
Wilson said he expected that based on farmer discussions at the latest round of meetings the proposal was likely to be different to that prepared in 2013.
But he said there were no pre-determined outcomes and the proposal to be released next month would be a product of grassroots discussions.
