Fonterra farmer shareholders question 'corporate extravagence'

By NZPA

Thursday 12th September 2002

Fonterra directors and executives were today taken to task by shareholders who believe there is a culture of extravagance in the giant co-operative.

The shareholders made it plain at Fonterra's first annual meeting that they were going to be paying hawklike attention to the financial dealings of the organisation -- and that any excesses by directors or executives will not be tolerated.

The main meeting venue at Mystery Creek, near Hamilton, was attended by 800 farmers, but another 700 shareholders also attended meetings around the country, participating in the proceedings through an audio-visual link.

Fonterra chairman John Roadley told the Hamilton meeting that while the first year of operation had not been perfect, he was still convinced that the right decision had been made in bringing together the Kiwi Dairies and New Zealand Dairy Group companies to form Fonterra.

When Mr Roadley opened the meeting up for questions about the accounts it was quickly obvious shareholders around the country had studied them minutely and wanted to make sure the directors knew how carefully they were watching the bottom line.

Farmer Catherine Ball suggested there had been a culture of excessive spending in the company's corporate activities, as shown by the budget being exceeded by $34 million.

Mr Roadley said there was no culture of excess and suggestions of extravagant offices in Auckland were far from the truth and he invited shareholders to visit the offices and see how modest they were.

Fonterra chief executive Craig Norgate said that leases of buildings in fashionable parts Auckland such as Parnell, Newmarket and Remuera were cheaper than what was being paid in Wellington.

Hillary Webber, of Cambridge, a former New Zealand Dairy Group director was not convinced, and said the company needed to make changes to its "culture of extravagance" because in the end Fonterra had to work or the shareholders would be the ones who had to pay if it did not.

"When it all boils down, we are the lenders of last resort and will be the ones who will have to dig deep if it fails."

Waikato farmer Don McKenzie asked: "How come we are still the lowest paid in New Zealand? Where is our money going?"

He was referring to payouts by Westland and Tatua which were higher than the $5.33 per kg of milksolids received by Fonterra suppliers last season.

Mr Roadley said that Westland and Tatua had not so far made their annual accounts public and Fonterra would subject them to detailed analysis to see how their results had been achieved.

Wanganui farmer David Hopkins suggested that while Fonterra wasn't paying peanuts and employing monkeys, it would please shareholders if the level of salaries being paid fluctuated at the same rate shareholders' returns did.

Mr Hopkins questioned the "excessive" use of consultants by the company -- $72 million worth, or as one of his friends had put it: "Seventy-two mutton-munching millionaires we are feeding."

Mr Roadley and Mr Norgate said much of the consultancy work had to do with the establishment of Fonterra and would not be necessary in future.

Mr Norgate promised that next year's accounts would contain "only a fraction" of the past year's spending on consultants.

John Withers, of Rotorua, asked if the company was going to be held liable for "lost" product in the same way sharemilkers were when they received bad milk grades.

Mr Roadley: "We drive our plants hard, particularly at the peak of the season and can lose a million litres at a time if plant goes down. This does not excuse the situation and we are working hard to address this."

Taranaki chairman of Dairy Farmers of New Zealand, Don Harvey, questioned why the number of people earning over $100,000 had doubled since the merger.

Mr Roadley said that in many cases it was because the people concerned were working in the United States where an average salary was $US45,000 ($NZ100,000).

"And I would like to think we were employing people there who are better than average," he said.

But he conceded that there was room for "greater clarity" in the section about salaries in the annual accounts. Mr Roadley later said shareholders had voted to support all seven corporate resolutions put to the meeting. Results included: ratification of the appointment Dr John Hood as a director (93 percent in favour), and similar approvals for Graeme Hawkins (83 percent) and David Hoare (94 percent). Also approved were the directors' remuneration (87 percent), appointment of KPMG as auditor (87 percent), Shareholders' Council budget (85 percent), and payments for shareholder councillors (88 percent).

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