Sir Ralph Norris spells out reasons for Fonterra board departure

Sir Ralph Norris took the opportunity at Fonterra Cooperative Group's [NZX: FCG] annual meeting to put to rest any speculation about his reasons for resigning as a director.

Sir Ralph stepped down yesterday from the 13-member board, telling shareholders it had "not been an easy decision." He also stepped down from the board of the manager of the Fonterra Shareholders' Fund.

He said there had been some speculation as to why he was leaving, much of which was untrue. The reason was to cut back on his governance commitments to allow more time for leisure activities, he said.

"Being a director on the board of Fonterra has been the most arduous I've had," he said. "It's about making time over the next three to four years and balancing my leisure and commercial activities."

Sir Ralph, the former chief executive of the Commonwealth Bank of Australia and Air New Zealand, joined the Fonterra board in May 2012.

He's just taken on the role of new chairman at Contact Energy, has been chairman of Fletcher Building since last year, and he also took on the chairmanship of Auckland tech start-up Ranqx Holdings in March. Mr Norris quit as a director of ASX-listed Origin Energy in September.

Independent inquiry involved more effort than anticipated
He said when he joined the Fonterra board he didn't realise the effort he'd be required to put in, including overseeing the 2013 board-commissioned Independent Inquiry into the WPC80 precautionary recall, which took up a lot more time than he had anticipated.

"But I got a lot of value from that process," he said. "While the WPC80 inquiry was very arduous and in-depth, it got to the real nub of the issues affecting the organisation."

The inquiry's detailed report found a number of factors contributed to the August 2013 event, including a lack of senior oversight of crucial decisions, problems with tracing potentially affected product, and slow escalation of the issue.

It made 33 recommendations, including 10 on governance issues, and Fonterra's progress on responding to those was reviewed by the board in the third quarter of 2014 and again in the second quarter of 2015. Key recommendations were making its food quality and safety specifications best in class and strengthening its risk and crisis management processes.

Sir Ralph said it was interesting that the process "carried a lot of management angst."

"But if you were not doing the job properly, that management angst would not be there," he said.

He said all of the inquiry's recommendations have either been implemented or are about to be.

Sir Ralph said that, in the words of Winston Churchill, "If you're going to have a crisis, never waste it.

"Your board did not waste it," he told shareholders. "There has been a lot of change in the organisation, a lot of which is not directly visible today."

A damning final government report on the botulism scare found Fonterra had focused on profits at the expense of a food safety culture and it was fined $300,000 for the incident, which damaged New Zealand's international reputation.

Outgoing director Blue Read, a former chair of the Shareholders' Council, also made a point of telling shareholders that during his three-year tenure on the board there had been no factions and it was very collegial.

"It has a clear purpose as to why Fonterra exists and we have the management team in place to deliver on that," he said.

A resolution by former directors Colin Armer and Greg Gent to reduce the size of the board from 13 to nine didn't get the required 75% shareholder support but chairman John Wilson acknowledged the 53.8% support it did get sent a clear message that many shareholders want a smaller board.

A review of governance and representation has been given renewed impetus with shareholder consultation due to begin early next year.

(BusinessDesk)