It’s the $5 million a year job that no-one wants.
Several top Kiwi chief executives have been approached for the top job at Fonterra, New Zealand’s largest company with a turnover of $19.2 billion.
It is understood one came close to inking the deal but at the last minute had misgivings and spurned the dairy giant’s advances.
Over the six years between 2011 and 2017, Dutchman Theo Spierings has been paid $29.27m but at this point his final year’s salary is unknown, as is the golden parachute awaiting him because it is likely to be paid out next financial year.
Fonterra cast a global-wide net in its search for a chief executive to replace Spierings, who announced in May he would step down.
However in August it opted to appoint industry insider Miles Hurrell as an interim head and said the search had officially been called off.
“It’s important that we give ourselves the time to take stock of where we are as a co-operative, breathe some fresh air into the business, then determine any changes that are needed,” new chairman John Monaghan said.
Spierings was Fonterra’s third chief executive since it was created in 2001. In 2011 he succeeded Canadian Andrew Ferrier, who followed the first head Craig Norgate.
Dairying was in Spierings blood. From the age of eight he worked on a dairy farm in the Netherlands during his school holidays.
Married with three children, the 53 year old holds a bachelor of arts in food technology and biotechnology and a masters in business administration.
He led Dutch co-operative Royal Friesland Foods in 2008 into a merger with Campina, creating Royal FrieslandCampina.
After the merger was completed Spierings ran his own company in the Netherlands with a focus on corporate strategy, mergers and acquisitions in the fast-moving consumer goods sector, before accepting the Fonterra post.
The reserved Spierings – some describe it as arrogance – was open early with media but in recent years has largely restricted his utterances to Fonterra’s financial performance at annual report time.
Cartoonist Sharton Murdoch highlighted unrest with Theo Spierings’ pay rise in 2015 against a background of lay-offs.
He was reluctant to front up to farmers, largely leaving the public relations role to former chairman John Wilson. Federated Farmers vice-president Andrew Hoggard observed farmers had not felt a “close connection” to Spierings. He was less approachable and more distant than his predecessor Ferrier.
Some of the reluctance by other chief executives to take on the Fonterra role may be related to the complex beast that is the co-op.
On the one hand it has to satisfy its 10,500 farmer/shareholders with a high milk price but on the other hand a high milk price squeezes margins for its added value products.
Rabobank global strategist Mary Ledman pointed out in a recent analysis of the world’s 20 top dairy companies that in contrast to other food and agriculture sectors, dairy is still dominated by large farmer-owned co-operatives.
Co-operatives occupy the fourth through seventh positions of the top 20. Together, the four largest dairy co-ops accounted for nearly $82.6 billion in turnover in 2017, more than double the annual turnover of Nestlé, which occupies the top position in the top 20.
“Dairy cooperatives operate in a challenging economic environment. Dairy farmers struggle with creating ‘farmholder’ versus ‘shareholder’ value. This is allocating capital/investing in their farm operation, rather than growing their co-operative’s shareholder value through mergers and acquisitions or plant expansions.”
“The expectations of many farmer-co-operative members to receive the maximum milk price has left the co-operative with limited funds to support future growth. Also, dairy co-operatives face a constant battle to find the right and/or innovative structure to help access outside capital,” Ledman wrote.
By New Zealand standards Spierings’ salary was high, but Fonterra deserves credit for transparency. None of the other international co-ops are prepared to reveal what their chief executives earn.
Privately owned Nestle, the world’s largest dairy company, paid its chief executive Mark Schneider a base salary last year of $3.68m, but with bonuses and performance shares added, it rose to $12m.
Spierings’ future role with Fonterra is uncertain. At the time of his resignation Wilson said he would continue to work in an advisory role after he stepped down. One thing is for certain: he will not be fronting for the announcement of the expected profit fall tomorrow.
* The highest ever milk price of $8.40 in 2014
* Interest-free loans of $383m given to 76 per cent of farmers to help them cope with low milk prices
* Fonterra becomes the leading dairy company in China
* Anchor becomes number 1 consumer dairy brand in China in 2018
* More than 140,000 schoolchildren get a free serving of milk every day
Spierings low lights
* The botulism scare in 2013, resulting in a $183m payout to Danone
* One of the lowest milk prices of $3.90 in 2015
* In 2016 Fonterra’s Australian farmers complained of being “hammered” by payouts being cut
* Up to 4000 contractors are made to wait between 60 to 90 days to be paid in 2016-18
* Director Leonie Guiney blocked from being re-elected to board in 2017
* The $750m investment in Beingmate written off by $405m this year
* Fonterra’s share price falls to $5, from a high of $8 in 2013
* Water pollution blamed on dairying