Garry Reymer, who was an unsuccessful candidate for a seat on the co-op’s board last year, said the group, New Democracy, had not yet had a formal response to proposals it outlined in a letter to Fonterra Shareholders’ Council (FSC) at the start of the year about farmer voting.
“It’s something we’ve put in front of them wanting them to go through their process,” he said.
“Things are not going to change overnight.”
The group was breaking new ground with its suggestion that Fonterra farmers who didn’t vote would forfeit those votes to FSC, he said. The fact that voter turnout was often low was destabilising the co-op, but if farmers had to make a choice to vote, not vote, or forfeit their vote to the FSC those votes would not be wasted, as they could be at present. FSC would be able to act more as a cornerstone investor in the co-op, and farmers would take more interest in who represented them on the council because they would want to know they could trust them to make the right decision.
“One thing which is going to kill the co-op is apathy,” Reymer said.
“Farmers have an obligation to Fonterra. They shouldn’t be spoonfed – that’s gone.”
If shareholders made the choice to forfeit their vote to the council they would need to know who their representatives were, and talk to them more.
Giving away some of their control could be a better way of securing their ownership of the co-op, rather than making the choice to give a proxy vote.
“That will help drive that connection and knock out some of that apathy,” Reymer said.
The group’s suggestion was a good mechanism to do that, he believed.
“We can’t sit back and do nothing,” he said.
“And the real strengthening part is that it empowers the council.”
Reymer said while there was keen competition for places around Fonterra’s board table there was often little or no competition for places on FSC, with detractors making comments that that it was a lapdog to Fonterra.
“A lot of farmers don’t care, but if the council had more respect that would encourage more farmers to stand,” he said.
“We’ve got to upskill the council and get proper representation in its wards. We might give away some power but with that we’ll strengthen the co-operative principles of ownership and control.”
Reymer, who was a member of the New Zealand Dairy Group’s farmer council before Fonterra’s creation, said members of New Democracy had sat down as a group to discuss ideas only a couple of times. It had not approached Federated Farmers as its strategy was to work with through FSC, hoping members would pick up some of its ideas and run with them.
“That’s their role and responsibility,” he said.
While the review of Fonterra’s principles was separate he said this and the issue of farmers’ representation through FSC did weave together.
“They are all challenges to Fonterra and the one really strong, underlying principle is farmer ownership and control,” Reymer said.
“Farmers have got to understand what that is. They’ve got to make sure they stick with the old values and ideas or they’ll lose the whole thing at the end of the day.”
Reymer said it was better that Fonterra’s governance and representation review, which has been underway for over 18 months, took a longer rather than shorter time, in order that it was thorough.
“Fonterra never has radical change,” he said.
“Trading Among Farmers took four years so this may take some time. It’s a council initiative, not a board initiative and they’ve got to get shareholders on side.”
Misinformation could be more damaging than no information.
Recent shareholder criticism of the co-operative’s mymilk initiative to attract non-shared milk supply in the South Island was not a problem, he believed (Dairy Exporter, January, page 15). Under the initiative a Fonterra subsidiary, mymilk, is handling contracts for non share-backed farms, at a price less than the co-op’s shareholders receive.
There is a limit of five years on contracts as well as the milk being able to make up only 5% of Fonterra’s national supply. But critics have voiced concerns about the new milk not contributing to the cost of new processing capacity.
“We need non-supplier milk,” Reymer said.
“We’ve put a toe in the water but I would rather we jumped right in.”
He believes there should be more optionality around milk supply, such as more existing Fonterra shareholders being able to supply milk from a newly purchased property without share backing in order that its processing facilities were kept “full to the brim”.
“We’ve got to increase and improve the options around mymilk,” he said.
The role of Fonterra directors was to maximise returns to shareholders, which would happen with more milk going through plants meaning greater efficiencies.
“If we keep all the milk in the co-op and do it on a mature and rational basis we’ll make money for every shareholder.”
Fonterra needed to make sure it was “a no-brainer” for those farmers who supplied milk under the mymilk scheme to become Fonterra shareholders.
When milk price, dividend and Farmsource benefits were added together there could be a 55-70c/kg milksolids advantage in supplying Fonterra.
“Other companies are there to make money on your milk,” he said.
“They’re not your friend.”
Voting change would be constitutional
If Fonterra Shareholders’ Council’s (FSC) role was to change this would require Fonterra’s constitution to be amended, deputy chairman Duncan Coull says.
“The council’s role is a well thought through one,” he said.
“Council is bound by the constitution and is acting exactly as mandated in it, whereby it carries out some monitoring duties but also many ‘cornerstone shareholder’ activities.”
It had yet to formally look at the farmer voting proposal put up by the New Democracy group but chairman Ian Brown had been in touch with Garry Reymer.
Coull said FSC had developed proposed principles with the Fonterra board, and consulted with farmers on changes. After considering their feedback it had resolved to take the proposed principles to this year’s annual meeting.
