Five candidates are facing off for three positions on the board of New Zealand’s biggest company. Anne Lee reports.
Fonterra’s China strategy, balance sheet and business performance are all top of the agenda for the five candidates vying for the three positions on the co-operative’s board this year.
With two of three sitting directors up for re-election by rotation – former chairman John Wilson and Nicola Shadbolt – not seeking another term, at least two new directors will be voted in this year.
Ashley Waugh is the only incumbent on the campaign trail and is joined by long-serving Zespri chairman and Trinity Lands chief executive Peter McBride, former Maori Trustee and chair of Maori Television Jamie Tuuta, Canterbury dairy farmer and former Fonterra director Leonie Guiney and Canterbury dairy farmer and irrigation company MHV chairman John Nicholls.
Guiney views her recent history involving legal action with Fonterra, resolved out of court just weeks ago, as a strength rather than a problem and believes the outcomes will allow her to be more effective on the board.
She says it was well known that she hadn’t fully supported Fonterra’s China strategy and she wants to rejoin the board to contribute to setting a strategic shift in the co-op to ensure owners’ capital is invested in areas of core strength.
Protecting owners’ capital and ensuring the strategy and management are focused on delivering good returns on shareholders’ investment is an imperative as is strengthening the balance sheet, she says.
“I want to see more realistic risk analysis so we can respond appropriately and in a more timely manner.
“Clarifying what business we are in, ensuring we have the right chief executive to deliver and then holding that chief executive to account – that’s what I want for Fonterra shareholders.”
Jamie Tuuta is a shareholder and former chairman of Taranaki farming company Parininihi ki Waitotara (PKW) and says recent criticism that Fonterra’s board makeup risked losing influence and input from grass roots farmers was a distraction.
“The face of New Zealand dairy farmers is a very diverse one and we need to lift the level of conversation to ensuring the right people, with the right skills are on the board to ensure Fonterra is successful.”
While the youngest candidate at 41, Tuuta has had 20 years of governance experience across a range of mostly Maori entities, including fisheries, which he says shares in some of the headwinds facing Fonterra such as diverse shareholder views, environmental challenges and public perception.
Experience of navigating those headwinds will stand him in good stead to help Fonterra ensure it maintains a social licence to operate, he says.
He wants to contribute to a unified, positive culture on the board and to setting a positive, clear strategy that management can deliver strong returns on.
He says the DIRA review is timely and with reference to the current requirements for the co-operative to supply competitors wants to see “it land where Fonterra is not expected to operate with one hand tied behind its back”.
John Nicholls owns six dairy farms and is a former Fonterra Shareholders Councillor.
He’s been outspoken about the risk of Fonterra’s board losing touch, through its make-up, with grass roots farmers who depend on a monthly milk cheque for their income.
That dependence drives urgency and demand for strong performance, he says.
He wants to see a review that results in a strategy that’s fit for purpose, related to Fonterra’s core values and simplified enabling it to be clearly executed.
Values, culture and strategy are the very foundations of the business and have to be right, he says.
While Fonterra is a good company it’s not a great company with returns not reflecting farmers’ investment and not improving over time as they should, he says.
“We’ve got to right-size our cost base and review the business closely so we can drive performance upwards,” he says.
Strengthening the balance sheet is also an imperative so the co-operative can withstand hits and continue to grow and reinvest in strongly returning areas of the business.
Fonterra needs to re-engage with its shareholder base and all New Zealanders to bring farmers and the country along with it. Ashley Waugh was elected to Fonterra’s board in 2015, is the former chairman of Moa Brewing Company and was formerly chief executive and managing director of Australia’s National Foods.
He’s also a director who puts cups on cows and is regularly hands-on on his 300-cow Te Awamutu dairy farm.
Having the grass-roots connection is important but what’s more important are the commercial and governance skills and experience directors bring to the board table, he says.
He’s been at the table for the last three years and had to front shareholders after Fonterra’s first loss result.
He says he’s had a never-ending focus on commercial performance and delivery and there’s an element of unfinished business for him personally in getting the co-operative to deliver the results farmers expect.
When Fonterra’s strategy is interrogated he says 80% is on track but 20% is not hitting the mark and it’s right to review and reset.
Fonterra has entered a new era where milk supply growth isn’t a major factor and it now has the optionality to move 45% of liquid milk equivalents into consumer, food service and advanced ingredients.
While some commentators have called for a review of capital structure to allow more capital to flow into the co-op he says neither he personally nor the board is considering capital restructuring.
But he does say that the complete asset performance review is likely to address concerns some have over balance sheet strength.
While McBride holds high-profile governance and management positions he also points out he has a strong link with grass-roots dairying as an equity partner in a 1000-cow farm at Tokoroa and nine years’ experience in his younger days as both a contract milker and sharemilker.
While that empathy is important so too is understanding the difference between governance and representation.
McBride says strategy not structure is where he’d put focus and ensuring the implementation of the strategy is executed well. Blaming structure is just masking the real issue which is company performance.
The co-op needs to take the opportunity to review its culture to ensure it’s positive and adhering to the co-op’s values so it is positioned to achieve the performance farmers expect.
McBride’s role in Zespri has given him a hefty level of experience of China and the challenges it can present – experience he says will be of benefit around the board table.
Fonterra’s had three bloody noses there – it needs to own the issues and learn from them if it doesn’t want a repeat, he says.
While he says his governance career was born somewhat out of activism, that approach needs to be left at the door and once sitting around the board table it’s important to work towards a positive, consensus-based approach.
Voting packs, containing candidate profiles, will be mailed to eligible shareholders on Monday, October 15, 2018. Shareholders can vote by internet or post, using the first past the post, majority system. Voting closes at 10.30am on Tuesday, November 6, 2018 with the results being announced later that day.
To hear for yourself what the candidates have to say in full-length interviews with Anne Lee click here