The successor to Fonterra chief executive Theo Spierings can look forward to a pay package of about $30 million over six years.
While farmers want the best person for the job, Federated Farmers vice-president Andrew Hoggard said he or she should ideally couple an in-depth knowledge of world dairy markets with some key personal attributes.
The low-profile Spierings understood the technical side of the business, but there were other aspects to running a co-operative of 10,500 farmers.
“You need a mix. Ideally not the showbiz type of CEO but more the low key sort connecting with farmers, the kind of guy you’d like to have a beer with. Because it’s a co-op, it will need someone who makes farmers feel like they’re part of the family,” Hoggard said.
Spierings earned a $8.32m salary package including bonuses last year to bring his six-year earnings to just under $30m, according to best estimates within annual reports. He announced on Wednesday he would stand down this year.
Hoggard also raised the prospect of the retirement of chairman John Wilson, who by the end of the year will have been on the board for four terms, and chairman for two.
“In the normal scheme of things he would retire but who is the next person to step up?”
Board member Michael Spaans had been highly rated but he died of cancer late last year.
Senior lecturer in accountancy at Otago University, Dr Helen Roberts, said farmers should have some input into the decision over a future chief executive.
“They need to have a say, although Fonterra has said it had already made a shortlist of candidates from an international search.”
Wilson said the board had instigated a search last November.
Strategic Pay chief executive John McGill said he hoped Fonterra would have groomed people within the co-op who could take over. But equally it might have to look further afield for a leader of New Zealand’s largest company.
Hoggard said after 14 years of overseas chief executives a Kiwi candidate who was involved with Fonterra would receive a positive tick.
“[Chief operating officer] Miles Hurrell would tick the box in terms of connecting with farmers, but I don’t know about his other abilities.”
He was wary of charismatic leaders who failed to perform financially.
One of the key issues a new chief executive needed to address was the rising competition from other dairy producers, especially in the Waikato region where Open Country Dairy will start to take milk from its new plant in August, and Synlait has plans to build a factory.
Hoggard said Spierings’ performance had been mixed and was overshadowed by the Beingmate failure.
“A lot of things have changed under Theo, Chinese revenue is up, Australia has turned around, you’ve got the corporate social responsibility charter, milk in schools, so there are a number of positive things. Overall it’s been more positive than negative.”
Roberts said she hoped for more transparency over performance and pay.
“Last year he had a very high base salary but then there wasn’t any transparency over why the bonus payments were made.”
She was incredulous over how he was able to walk away with a $2.85m performance payment this year after having overseen the Beingmate investment, which Fonterra has now written off at a cost of $405m.
McGill said the reality was New Zealand was a price taker when it came to such big jobs.
“It’s an international market, and although some Kiwis get upset about it, that’s the reality. There’s increased mobility and that adds to the issue of paying going rates.”
He agreed with the need for better transparency over chief executive pay. A Code of Corporate Governance had come into effect in the last six months, although it applied only to listed companies. However in organisations such as Fonterra where there was much public interest, the provisions should cover it as well.
“It covers key performance indicators, it has to differentiate between base salary and benefits, the structure and amounts of short term and long term incentive pay, it has to specify the organisations’ remuneration policy,” McGill said.
Closing the Gap spokesman Peter Malcolm described it as “scandalous” that Spierings had presided over such a big loss.
“Company directors like to claim that high CEO salaries are justified by outstanding performance. But in the face of this disastrous financial result, the directors of Fonterra need to explain to Fonterra staff and shareholders — indeed, to New Zealand — why they paid Mr Spierings $8.3m,” Malcolm said in a statement.
By: GERARD HUTCHING