Five principles established at Fonterra’s formation in 2001 were to be renewed and expanded to six, to reflect some of the recent structural changes to the co-operative.
The council received 70 to 80 submissions after it circulated the proposed changes to all shareholders before Christmas.
Council chairman Ian Brown said those suggestions were welcomed and most were in favour of the new wording.
He expected the council to receive the feedback and ratify the new wording without changes at its February meeting.
However, not every shareholder was happy with the proposed new wording.
Coromandel supplier Jenny Morrison said the proposed wording changes appeared reasonable at first but on reflection she thought they would make fundamental changes.
“There are subtle differences in power and control with the new proposals that cause me great concern,” she said.
Proposed principle three said, “Supplying shareholders must comply with the co-operative share standard in respect of their milksolids supplied.”
Morrison said that changed the requirement to hold shares (and be automatically issued with them), which she called a founding principle of a co-operative.
Instead the share standard could be changed by directors and management at any time, not requiring farmers’ input or vote.
The old principle five was to be split into new principles five and six because of the capital structure changes approved by farmers in 2012, when Trading Among Farmers (TAF) was voted in.
The new clause five safeguards milk payments to supplying shareholders and clause six the financial benefits and obligations that arise from invested capital.
Morrison said the new wording laid a mandate on the co-operative to work for “shareholders”, who now included non-farmers.
“If this was worded ‘supplying shareholders’ I would be comfortable but we need to be mindful that ‘shareholders’ today may be quite different in the future when the company evolves.
“I believe that this is the first step in giving away control of our company from NZ dairy farmers.
“Once these principles are passed, NZ dairy farmers change from being the purpose of Fonterra (maximising milk price) to being a cost of Fonterra (raw milk as a cost of goods sold).
“In other words, NZ dairy farmers become just a part of a bigger business rather than the purpose for that bigger business.”
Morrison said the changes opened a loophole that couldn’t be closed in the future and urged farmers to speak to their regional councillors.
She was also the chairwoman of the shareholders council of the LIC, which has farmer-only A shares and investor B shares.
She believed it was possible to have a farmer co-operative evolve without stretching its core principles.
“I think the Fonterra route is death by degrees.”
Brown said he agreed that evolution was possible and that LIC had a very good co-operative structure but disagreed that the new principles were some sort of slippery slope.
“I think Fonterra has all sorts of checks and balances to secure farmers’ rights and capital.”
He referred to the Milk Price Manual, the value-add strategy, the dividend policy and the capitalisation ratio, as well as the constitutional watchdog role of the council.
Meanwhile, Fonterra supplier and unsuccessful director candidate in 2014, Gary Reymer of Cambridge, has proposed changes to the shareholders’ council itself.
He said the council needed to be less of a watchdog and more of a cornerstone investor and that would result in more engagement from shareholders.
A common concern on the hustings last year was increased detachment of farmers from the co-operative and the loss of milk supply to competitors.
The council could take on more “representation” roles back to shareholders, freeing up directors for governance, Reymer said.
Brown said Reymer’s views would be discussed by the council.
