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Fonterra at risk from friendly fire

Director warns that the positives and potential developed in the first hard year is a solid base from which to build for the future

The cry for change is colouring the current election campaign. It is the soft option for challengers as it doesn’t crunch the hard issues of constructing Fonterra they way we expect it to be, and perform.

What we need now is stability and continuity. The Fonterra Board has some very serious decisions to make over the next few months; decisions regarding our investment in Australia, our capital structure and our pricing system. Those decisions will be based on knowledge built up over the last 12 months and we must not risk losing that knowledge and understanding at this critical time.

I can understand the temptation to call for change during an election campaign, and indeed, a number of people, including some of the current aspirants, are advocating wholesale change. I urge caution and ask that people seriously consider the wisdom of this. There are some enormous risks in taking this approach. Fonterra has been through unprecedented change over the last 2 years. A recent article written by one of Fonterra’s most outspoken critics suggested that a board of like-minded directors would be “….a real shame.” He is absolutely right.

Fonterra and its shareholders must have people who understand the issues, who are prepared to think and act independently and always in the best interests of our shareholders – and directors who put the company ahead of personal gain. We want people who are strong enough to challenge the thinking of management and other directors, to ensure that the debate is thorough and robust. We don’t want yes-men or puppets! We want people who understand that the livelihoods of the shareholders of Fonterra are in their hands; that as shareholders we cannot just walk away if things don’t go well; that as shareholders we depend on them for our individual businesses to succeed.

Beware of those who so readily criticise the company without offering a positive alternative. Anyone can throw stones and an election campaign encourages stone throwing! The Board of Fonterra is a team of 13 people. One individual cannot “change the world.”

Given the collective responsibilities and accountabilities of the Board, it would be interesting to ask those promoting change whether they would be so strong about their view if it were a different group of directors up for re-election this year, say the group that are coming up next year. I hope someone does ask that question.

Many of the issues that have been raised as criticisms have been or are being addressed by the Board.

- We have worked on and agreed the company’s 5 to 10 year strategy. It is clear and exciting as it focuses on our strengths and has the potential to deliver real gains.

- We have identified that the benefits of the merger can exceed the promised $310M and we have plans already in place to capture that.

- We are currently consulting with shareholders on the process needed to abandon the much-hated Peak Notes and replace them with an alternative pricing signal.

- We have agreed the debate regarding capital structure will be held as soon as this election is over but that it must be within the context of the agreed strategy.

- Policy has been adopted that ensures the appointed auditor is precluded from undertaking any other consultancy work.

- We have restructured the organisation so that there is a very direct link between the market and researchers and innovators, so we are in a far stronger position to provide the market with what it demands in terms of new products and new opportunities.

- We are also redesigning the supply chain so our customers can communicate directly with our supply people and we are far more responsive to their needs.

It is time for everyone to put the past behind us. It is gone. We must move forward – Fonterra is new and it can be great. I am confident that will happen provided we have people on our Board who want to win and who do not care about the personal glory. Winners are team players and understand this is a team game.

The most important thing shareholders can do in the next two weeks is VOTE.

Please ensure that you have your say about who you want to lead our company forward for the next three years. It is very important that every voice is heard in a co-operative business. Continuity and stability and the fulfilment of Fonterra’s promise is what shareholders need. Please VOTE!

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