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Fonterra resignation spooks Shareholders' Council

By Phil Boeyen, ShareChat Business News Editor

Monday 21st January 2002

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The Fonterra Shareholders' Council says it's extremely concerned at the sudden resignation of one of the company's directors after just a few months in the job.

One-time Lion Nathan (NZSE: LNN) director, Mike Smith, has stood down from Fonterra's (NZSE: FCGHA) board, citing concerns about governance.

The dairy giant's Shareholders' Council chairman, John Wilson, admits that the company has been in transition but says the resignation raises serious questions.

"Before the merger, shareholders understood that one of the pre-conditions for the success of Fonterra was getting the governance right. We [the Council] have been talking to the board for some time about the governance of Fonterra - this rings further alarm bells."

Mr Wilson says dairy farmers not only rely on Fonterra for their income, but the nature of the co-operative's capital structure means that they also carry the full risk of business decisions made by the board.

"We've always said that we need first-class governance within Fonterra, which ensures transparency and accountability to shareholders."

Mr Wilson says the Council has already reached agreement with the Fonterra's chairman, John Roadley, to get the governance right so that shareholders can have confidence in the future of the co-operative.

"We have been assured that the board will be meeting very shortly to address these concerns. The board must be able to clearly articulate to shareholders what governance is to Fonterra, what their aspirations are in this area and how shareholders will see that delivered."

Fonterra is New Zealand's largest company and one of the largest dairy businesses in the world. It accounts for around 20% of New Zealand's total export receipts.

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