Could a change in chairman mean a change in direction for New Zealand dairy giant Fonterra?
Like it or not, the governance of Fonterra, has an impact on all of our lives.
As the world’s largest exporter of dairy products, the success of Fonterra is inextricably linked to the success of New Zealand so we should all take interest in who runs the company and how they’re doing it.
The dairy giant accounts for a quarter of all New Zealand exports and employs 22,000 people globally – 11,000 of which are in New Zealand.
It has the country’s highest paid chief executive (pocketing $8 million a year) and the most trusted New Zealander as its brand ambassador (All Blacks legend Richie McCaw).
And even if you don’t care about the economic fortunes of Fonterra or New Zealand, there’s the environmental impact Fonterra has on New Zealand to consider.
Whoever is in charge of Fonterra has a huge influence over the future state of New Zealand’s environment.
As of this morning the dairy giant has a new chairman and by the end of the year it will have a new chief executive. The company could be at a turning point.
What is Fonterra?
Fonterra is a cooperative that produces dairy products and sells them to the world. Most Kiwis have been raised eating Fonterra products. Think brands such as Anchor, Fresh ‘n Fruity, Mainland and Tip Top. The cooperative, or co-op as some call it, was formed in 2001 when Kiwi Co-operative Dairies and New Zealand Dairy Group merged. That merge was only possible thanks to government deregulation.
Who owns it?
Fonterra is owned by 10,000 farmers. These farmers are represented by the Fonterra Shareholders’ Council – an elected national body of farmer shareholders. The council, which is made up of 25 elected councillors, performs functions set out in the “Fonterra Constitution” such as performance monitoring and director elections.
The farmers are in charge?
Not exactly. Like most companies Fonterra has a board of directors. This is made up of up to 11 members – seven from its shareholder base and four appointed by the board and approved by shareholders at its annual meeting. In general the board determines the overall direction of the company. More specifically it decides how much dividends farmers are paid out, approves significant investments, reviews and approves company strategy, appoints the chief executive and reviews their performance.
Who leads the board?
The board is led by a chairman who is elected by the directors. Since 2012 Fonterra’s chairman was John Wilson, but he resigned on Friday, citing medical reasons. Fonterra’s board selected John Monaghan, who has been on the board since 2008, as the co-operative’s new chairman. Fonterra pays its chairman about $405,000 a year and its directors each get $165,000 a year.
So Monaghan is the top dog at Fonterra?
Depends on how you look at it. If you base it on salary, then he is nowhere near head honcho. That title goes to chief executive Theo Spierings, who is New Zealand’s highest paid executive earning about $8 million a year. Remember, the chief executive is decided by the board of directors, which gives the chairman some pretty strong powers. Spierings, recruited from the Netherlands, sets Fonterra’s overall direction and leads the Fonterra management team. Also part of the management team is several different chief operating officers and a chief financial officer. These business leaders are the executors of the strategy set by the board.
What happens when Spierings leaves?
There is a big question mark over who will pick up the crown as New Zealand’s highest paid chief executive when Spierings leaves. On Friday NZ First MP and Regional Economic Development Minister Shane Jones said he wanted it to be a Kiwi, after the past two chief executives were from overseas. Whoever it is, you can bet they’ve got a big job on their hands managing the fortunes and public image of New Zealand’s largest company.
By: John Anthony