Electing Dairy Leadership Sunday, May 18, 2003
Last week's exchange with Tony Baldwin raised the question whether Fonterra shareholders were changing their opinion on Fonterra continuing as co-operative.
Reports that attendance at the Fonterra organised election meetings show that active interest in the current director elections is rather low. Perhaps, not an unsurprising condition, for such a large organisation, which appears remote and distant, to its rank and file members.
Some may see the current co-op versus corporate debate has the core issue in these elections; however, it could be that many shareholders see that debate as being about exchanging one poor servant for another.
Many shareholders may see the real issue lying with the financial results produced by what is, a new company, consolidating a previously fragmented cooperative industry, rather than some esoteric debate on a corporate restructure.
To this observer, the nub the problem lies in the definition and execution of good business practice under either structure. To claim that one structure will respond to market demand better than another is to ignore the fundamentals of marketing - find a market and fill it - a task driven by attitude rather than structure.
Today's AMP annual meeting was a salutatory lesson to the proponents of corporate excellence versus cooperative mutual reward. The advantages promised from the demutualisation of AMP has certainly provided nothing more than opportunistic capital gain to those who had the wit to get out immediately following the share float.
Whilst the comparison of a company providing financial services with a company providing a food processing and marketing service may appear as comparing apples and oranges, there are many similarities in the promoted benefits, hopes and aspirations of a demutualised AMP and a corporatised Fonterra.
The problem acknowledged today by AMP centred on a management 'blind spot" in its international business - a problem not unlike the management risks facing Fonterra.
Fonterra's performance shortcomings will not be solved by changing its ownership structure. What is required is a re-doubling of efforts to manage that which exists.
For Fonterra's shareholders this is not of time for irrational changes of direction or the chasing illusionary paper notes representing future corporate value. It is a time for ensuring that the best available directors lead the cooperative by employing the best possible managers who will execute the best production and market strategies to give the best possible payout for this and subsequent years.
For in a cooperatives success is measured by payout. Not a comparative payout but an absolute payout that after providing for the capital growth of the cooperative rewards shareholders for the task completed and the risks taken for producing quality milk ino the farm vat.
Fonterra can be a successful cooperative.
The critical element is quality leadership and excellent management. Not an unreasonable expectation from this country's largest commercial entity.