Fonterra’s new chairman, John Monaghan, the man chosen to resuscitate the co-op’s flagging fortunes, got a big serve from the NZ Herald’s Andrea Fox this week. Under the headline “New chairman – same old Fonterra song”, she wondered if anyone else had a sinking feeling when Monaghan presented his idea of the biggest challenge facing the embattled dairy company: the need to change the law that forces Fonterra to accept milk from any farmer and sell it to rivals at a subsidised price.
Fox went on:
“Meanwhile back in real life land, Fonterra had a crisis of confidence among its 10,000 farmer-owners due to its financial and investment decisions, its balance sheet wasn’t pretty reading, and our so-called ‘national champion’ was being scorned by the public and the Beehive.
“With the chief executive as well as the former chairman gone, Monaghan, rather than jump into the leadership void and address these inconvenient truths head-on, pitched a tired old complaint that’s worked for Fonterra’s spin machine before, firing up righteous indignation among farmers when it’s needed a distraction tactic.
“It’s also been a handy one for implying if only Fonterra didn’t have this pesky bit of the legislation holding it back it’d perform better.But challenged by the Herald to produce evidence of the hardship created by its statutory milk obligations, New Zealand’s biggest company cried commercial confidentiality”.
Fox went on to note that Monaghan’s idea of Fonterra’s biggest challenge
“ … is well offside with his shareholders. Several told the Herald his priority should be restoring their confidence in the board and senior management”.
As Point of Order sees it, Monaghan would not be the first farming leader to stick to the party line when stepping into one of the toughest jobs in the global dairy industry. Having graduated in the school of co-operative business, he’s not going to desert the ethos to which the 10,500 farmer-owners subscribe so rigorously.
It’s clear the big co-op is now at a critical point in its relatively short history. Many of its farmer-suppliers are dissatisfied, and so too are its public shareholders who see competitors’ financial performance out-stripping it.
Since the Fonterra board announced a “pause” to see where it stands in the wake of John Wilson suddenly leaving as chairman because of ill-health, and the decision to put the search for a new CEO on hold as Theo Spierings departs, the co-op has a chance to set clear strategic goals and find the flexibility in tactics which has served its nimble, younger competitors so well.
So from what direction could new ideas emerge?
Some might be pinning their hopes on a relatively fresh face at the Fonterra board table, Scott St John, who had a stellar career as chief executive of First NZ Capital. One authority reckons St John’s record at that investment firm is rather like that of Steve Hansen as coach of the All Blacks.
St John left FNZC when he was just 50 to take up directorships, including those with top companies like F&P Healthcare and Mercury as well as Fonterra. His proven ability with FNZC lay not just in the selection of highly talented individuals, but in setting clear goals and applying a culture in which those individuals sought to shine.
He told the NZ Shareholders’ Association annual meeting in Auckland recently the co-op won’t be changing its ownership structure but it needs
“ … to think carefully and innovatively how we fund the projects we enter into”.
He pointed to the Indian joint venture with Future Consumer Ltd to market consumer and food service products as
“ … probably more likely to be the sort of thing you see us doing”.
If Fonterra is to succeed in restoring the confidence of both its suppliers and shareholders, not to mention Andrea Fox, the key may be the influence directors like St John has in re-shaping its strategic goals.