Majority of farmers find Fonterra Shareholders Council ineffective - survey

The council is supposed to monitor the company on behalf of its 10,000 farmer shareholders.
The council is supposed to monitor the company on behalf of its 10,000 farmer shareholders. Photo credit: Newshub.

By Eric Frykberg of RNZ

The main watchdog for dairy giant Fonterra has been told it has to lift its game.

The comments came in the first of a two-part inquiry into the Fonterra Shareholders Council.

The council is supposed to monitor the company on behalf of its 10,000 farmer shareholders, but it has incurred a lot of criticism including comments from the Agriculture Minister Damien O'Connor that it was "less a watchdog than a lapdog".

The Shareholders Council commissioned a review of itself last year, chaired by veteran public servant James Buwalda.

The inquiry group comprised two members of the Fonterra Board, two members of the Shareholders Council and four independents.

The first stage of the review summarised the opinions of 1400 Fonterra farmer shareholders, who responded to an online survey.

They looked at four issues: representation of farmers, monitoring of Fonterra's performance, connections between the company and farmers, and the role of the council in guardianship of the Fonterra co-operative.

While most respondents valued the existence of the council, many felt its performance was less than they wanted.

"[Just under] 10 percent of respondents suggested the Council should be disbanded, citing poor performance, structural flaws, and/or poor value for money," the report said.

"Just on 60 percent rated the Council's performance to be less than moderately effective."

The report added that many farmers thought the council had little influence with the board of Fonterra which was often unwilling to engage or listen to it.

"Where Fonterra's financial performance has negatively impacted shareholder value, this reflects badly on the Council, given its role in protecting shareholders' ownership interests," the report said.

"Relying solely on Director elections to hold the Board to account is slow and inefficient; they need the council to be holding Directors to account more routinely and rigorously."

The council also needed to have better access to Fonterra's information, and choose key areas where it should focus its attention.

"It appears that the council has been unable to 'force' Fonterra to be open with farmer shareholders about its capital investments and financial performance," the report said.

Federated Farmers' dairy spokesperson Wayne Langford said the report showed how much work was needed and farmers would be expecting improvements.

The Shareholders Council was supposed to hold the company to account - it had not been doing that to farmers' expectations - but hopefully, the report would lead to improvements.

Shareholders Council chair James Barron declined to comment on the report until he had read it thoroughly, but said its recommendations would be closely studied by his organisation.