Shareholders send Fonterra back to drawing board after constitutional changes fail to attract enough votes

Fonterra [NZX: FSF] says it will consider amending constitutional changes that would allow it to shrink its board and adopt a new system for electing farmer directors after failing to win support for the measures at a special meeting of shareholders.

The world's biggest dairy exporter said 63.74%  of votes were cast in favour of the proposed changes to Fonterra's constitution and Shareholders' Council by-laws at the meeting in Hamilton, short of the 75% support required.

The board and council "will consider adjustments to the recommendations on the cooperative's governance and representation model with a view to bringing a revised proposal back to farmer shareholders before the end of the year," chairman John Wilson said after the vote. "We owe it to our farmers and to New Zealand to move this cooperative forward by developing a model that gets the best possible talent on to the board in the future. I am confident we can develop a solution which secures a mandate," he said.

Some farmers have lobbied for a smaller board and the proposal put to the vote today would have resulted in seven farmer directors and four independents, compared to the nine farmers and four independents currently. The chair is elected by the board and would remain a farmer director. The new voting process for farmer directors would have ditched the single transferable voting system, which has been criticised for politicising elections, in favour of a nominations committee putting forward candidates who would need at least 50%  support to join the board.

Wilson said while the vote failed, it showed there was support for change.

"We asked our farmers to consider significant changes to the process for electing directors," he said. "A strong majority, almost two-thirds of our farmers, voted in favour of the recommendation. They want a system that gets the most knowledgeable and skilled candidates on to the board; and a process that encourages diversity and sees our most capable farmer shareholders put themselves forward."

A majority of Fonterra's farmer shareholders supported a proposal from fellow shareholders and former directors Colin Armer and Greg Gent to reduce the board to nine at the annual meeting last October but that vote also fell short of the 75% needed, including a requirement for 50% support of the Shareholders' Council.

(BusinessDesk)