This year’s AGM includes a resolution that may result in the replacement of the existing shareholders council with a shareholder reference group that comprises 12 members, compared to the 21 in the shareholders council.
The move is being met with claims it will significantly reduce the capacity of shareholders to have any oversight on the co-operative’s governance and direction.
Past council chair Jenny Morrison says she found the move concerning for several reasons.
“They are trying to work a couple of major changes to the constitution, and these have not been clearly signalled to the shareholder base. A loss of the shareholder council is the loss of farmers’ major contact point with the co-operative,” Morrison said.
The LIC’s shareholder council was established at the same time as Fonterra’s under the Dairy Industry Restructuring Act (DIRA). A key role was to protect farmers’ interests in the national dairy herd database, then held by LIC.
LIC Shareholders Council chair Mark Meyer says the main purpose of the council had been to protect a database the co-operative no longer held.
The database has since passed to DairyNZ stewardship.
“This is a work in progress and the third time we have had a crack at it over the past 10 years,” he said.
The changes also include a LIC proposal to reduce elected company directors to six, three in each island. The reference group would replace the council.
A letter from LIC chair Murray King informs shareholders that the group’s role would be to “provide the board with open, honest and constructive views from shareholders on major shareholder issues and engage with management on operational performance and quality product development, service delivery and enhancements”.
But with that goes the current council’s constitutional power and veto right over LIC’s mission statement and key objectives, if shareholders are not happy with them.
The council’s removal also results in loss of its ability to call a special shareholder meeting if it has “serious concerns” about LIC’s ability to meet its mission statement and key strategic objectives.
Morrison says in the past, the council had played an active role in keeping LIC’s objectives on track.
She cited council efforts to ensure LIC did not split the company off and sell its technology side, including MINDA to overseas interests as an example.
“Without that clause there, the reference group will not even know what is in the pipeline,” she said.
Meyer acknowledged some shareholders may feel the shift from a council was the loss of a guardrail.
“But we believe we are strengthening the co-operative in that one of the things we propose is to have an independent organisation monitor the financial performance of the co-operative,” he said.
“When you consider what the LIC Shareholders Council does now, none of us can read the accounts to the nth degree required, so this would strengthen financial scrutiny.”
Meyer says the loss of the council would not negate individual shareholder’s ability to call a special meeting if they were concerned about some aspect of the co-operative’s operations.
The proposed change in constitution also makes the reference group’s functions capable of being altered by agreement between the company chair and reference group chair.
Under current shareholder council rules, this requires a shareholder vote.
“So I fail to see how this strengthens LIC governance,” Morrison said.
Her concerns are shared by Waikato farmer Ian Storey who also used to be on the council. He challenged the timing of the decision and how extensive the consultation process has been with shareholders.
“I was on the shareholder council, so my antenna is probably more open to this,” he said.
Meyer defended the move as an evolution after 20 years of the existing structure, but acknowledged the co-operative’s typically low voter turnout and that a 75% approval was required by those who did.
He urged shareholders to vote if they feel strongly enough about the move.
The LIC’s annual general meeting will table the resolution on October 15, with online voting closing on October 13.
