Fonterra is currently undertaking a review of its governance and representation model, to ensure it continues to support the Co-operative’s business strategy and provides an appropriate level of representation for its farmer shareholders.
Fonterra's purpose as a co-operative is to collectively maximise the value of our farmers' milk. We do this by achieving the highest possible Farmgate Milk Price and dividend, reflecting that in the share price and by delivering shareholder benefits through Farm Source initiatives.
Strong governance and representation is fundamental to achieving this purpose, ensuring strategy and business plans are developed, debated and approved, investments are weighed against future returns, performance goals are met and farmers’ views are represented.
Fonterra has had the same governance and representation structures since it was established nearly 15 years ago. A lot has changed since then. Our revenue, assets and shareholders’ equity have all increased considerably. Our international presence has increased with milk pools in Europe and China. Trading Among Farmers provides farmers with financial flexibility and improved information on the Co-operative’s strategy and performance. Fonterra’s business strategy has also evolved, and was refreshed in 2013 with updated priorities. Its overall aim is to continue the Co-operative’s growth in terms of revenue, value achieved, and returns to farmer shareholders.
It is good business practice for governance and representation structures to be reviewed following a change in strategy and in 2013, at the request of the Board, a working group comprising members of the Board and Shareholders’ Council undertook a full review.
The working group spent more than a year benchmarking the Co-operative’s governance and representation against what was considered world class at the time and made a series of recommendations to the Board.
Their good work provides a strong platform from which to have a quality conversation about how best to evolve our structure, fine-tune our systems, and adapt our skill set to meet the future demands of our Co-operative.
We now want to open up those discussions, and outline the main points we're asking our farmer shareholders to think about. We will use the farmer feedback to help develop possible options for further discussions in April, seek independent review of those options, and keep refining our ideas so that we can bring any new proposal back to our farmers in May.