Board Committees
The Board uses committees or working groups to facilitate more effective and efficient decision making. Committees and working groups have written terms of reference, and report on their activities to the Board.
Committees are made up of directors only, although other people may be present as observers, whereas working groups may have employees, shareholders, or others as members in addition to directors.
The Terms of Reference and membership of each committee or working group are reviewed annually by the Board. There are currently five permanent committees of the Board and one working group, as identified below. Other committees may be formed as required, for example, in the event of major merger and acquisition activity.
Audit, Finance & Risk Committee (AFRC)
The AFRC is comprised of up to five directors, and must include an appointed director and the chairman of the company. At least one member of the committee is required to have an accounting or financial background.
The AFRC has significant roles in:
- Assisting the Board to ensure the quality and integrity of financial reports
- Reviewing the risk and assurance processes
- Oversight of treasury operations and policies
Principal activities of the AFRC include establishing and reviewing internal audit and global assurance processes; reviewing the internal control framework, significant risks, exposures and mitigation strategies; reviewing financial reporting practices and offering documents; reviewing and overseeing financial risk strategies, hedging policies and other treasury functions; ensuring the timeliness and balance of disclosures on the affairs of the company; overseeing the appointment of external auditors and the external audit process.
Appointments Remuneration and Development Committee (ARD Committee)
The ARD Committee is comprised of up to five directors, two of whom are appointed directors. Principal activities of the ARD Committee include obtaining assurance that the company's human resources policies and practices support achievement of the company's goals; overseeing appointments of the CEO, roles reporting to the CEO, and key professional advisors in the area of legal and public relations; reviewing remuneration strategies and plans; and overseeing the development of key employees. The committee is also developing processes for evaluation of individual directors and the Board as a whole.
Shareholder Relations Committee (SRC)
The SRC is comprised of four directors. Up to four shareholder councillors also attend SRC meetings as observers. Principal activities of the SRC include monitoring the interface between Fonterra and shareholders; reviewing the delivery of services to shareholders, and terms and conditions of supply; acting as an interface for shareholders with complaints against the company and liaising with the Milk Commissioner in relation to complaints that cannot be resolved. The SRC also provides a significant interface with the Shareholders' Council on shareholder issues.
Fair Value Share Review Committee (FVS Committee)
The Fair Value Share Review Committee comprises six members. The Board Chairman and CEO are ex-officio members. Two members of the Shareholders Council are entitled to attend as observers.
The principal activity of the FVS Committee is providing advice to the Board on the setting of the Fair Value Share price, which the Board is required to do under the constitution. In order to fulfil this role the FVS Committee reviews information provided by management to the aluer, and interacts with the Valuer to the extent required to enable the committee to obtain a high-level understanding of the process used in the determination of the Fair Value Range.
External Relations Committee
The External Relations Committee is comprised of three directors. The purpose of the committee is to assist the Board in building relationships with political contacts and international trade policy contacts as well as with selected joint venture partners.
Milk Pricing Working Group (MPWG)
The MPWG is comprised of four directors, up to two external appointees, and a management representative, being the Director Fonterra Milk Supply. The purpose of the MPWG is to assist the Board with the development of milk pricing signals in co-ordination with the development of the capital structure.
Candidate Assessment Panel and Governance Development Committee
In addition to the Board committees, the Board and Shareholders' Council agreed to establish the Candidate Assessment Panel and Governance Development Committee as joint initiatives with the objective of providing greater focus on the development and assessment of future candidates for the elected director positions on the Board and so that shareholders will be better informed in the electoral process. The panel is independently chaired and has two directors and two shareholders' councillors as members. The committee comprises two Board members and three shareholders' councillors.
