Fonterra names candidates for board

Fonterra has named six candidates for its board at next month's election and pressure has emerged to reduce the number of directors.

Chairman John Wilson, directors Blue Read and Nicola Shadbolt are retiring by rotation and are eligible for re-election.

The new candidates are Murray Beach, from Marlborough, Greg Maughan (Marton), and Ashley Waugh (Te Awamutu).

Beach last year put forward an unsuccessful motion at the annual meeting in Palmerston North, which called for Fonterra to halt its expansion strategy until the milk payout recovered.

Fonterra and Wilson came under fire from farmer shareholders early this year after a disappointing first half result and a very low milk price.

Since then, the company's earnings have bounced back - although they are still well short of where they have been, historically. Fonterra's payout forecast has also improved to $5.00-$5.10 a kg from a previous forecast of $4.25 to $4.35.

Chris Lewis, Federated Farmers Waikato president, said that if Wilson were to lose his seat, it was not clear who would succeed him as chairman.

"That will be the question on everyone's minds," Lewis said. "It's all very well punishing him for some bad results, but who would replace him.

BusinessDesk reports that Fonterra shareholders and former directors Colin Armer and Greg Gent are calling for Fonterra to trim its board in a resolution they want voted on at the November 25 annual meeting.

The pair have put forward a notice of proposal to cut Fonterra's number of directors to nine from the current 13 in a bid to lift the cooperative's performance and improve its governance, they said in a statement.

The proposal would need 50 per cent of the Shareholders' Council to support it, and 75 per cent backing from Fonterra's shareholders, and would reduce elected directors to six from nine, and appointed directors to three from four. They say a smaller board would increase efficiency and decision-making.

"Lack of confidence in the company is now causing serious milk erosion to competitors and the commerce performance of the co-op is at an unacceptable level on both the dividend and the share price," Gent said. "Continuing along the same path and hoping for a different result is unrealistic. So in our view a fundamental change is needed at the board level."

Earlier this year, Fonterra director and former chief executive of Commonwealth Bank of Australia Ralph Norris said he would retire at this year's annual meeting.

"In recent times we've seen a couple of high calibre appointed directors depart early, and we need to ask why," Gent said.

Armer said Fonterra's promise to review governance and representation three years ago hasn't amounted to anything, and that the 13-strong board installed when the cooperative was formed was a "pragmatic number which facilitated the merger".

The proposal to trim the Fonterra board won't target anyone seeking election, and would require the Shareholders' Council to hold an election for the six elected directors in March next year.

Neither Armer nor Gent will seek election to the board. Armer was a director from 2006 and 2012, and Gent was on Fonterra's board from 2001 to 2011.

"Our proposal is based on our knowledge and experience of boardroom dynamics," Armer said. "Our process has been designed to make sure that shareholders retain the absolute power to elect the candidates they regard as the best candidates for the job."

The election, which will be by post, fax or internet, will take place from October 31 through to November 23. A result will be known by the time of Fonterra's annual meeting on November 25.

- Additional reporting: BusinessDesk

 

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