Massive changes to dairy giant Fonterra’s capital structure has been recommended by the 2025 Taskforce led by Don Brash.

The taskforce’s report out today specifically names Fonterra and criticises its co-operative model as under performing – likely making taskforce leader Don Brash dairy farmers’ enemy number one.

It suggested the government should take a hands on approach.

“Fonterra’s performance matters for New Zealand and in view of parliament’s role in the creation of Fonterra, the government has a legitmate strong interest in the future structure of the company in a way that it would not if a more competitive model had been adopted earlier.”

Outside capital should be allowed in the door of New Zealand’s biggest company, and the government should kept up pressure to encourage it, the taskforce recommended.

In the report, the taskforce recognised that Fonterra exists in its current dominant position because of exceptions granted to the Commerce Act to allow it to form.

“As with so many state-sponsored or facilitated businesses, Fonterra has not lived up to the promise sold to New Zealanders when it was allowed to form,” the report stated.

“We do no believe that in its present co-operative structure it can do so, and we believe it is important for the long-term health of the dairy industry in New Zealand, and hence for farmer shareholders, that a transition to a conventional corporate form with outside traded capital occurs expeditiously.”

Two years ago, the Fonterra board shredded plans to put a recommendation to shareholders that the company partially list on the stock exchange.

Fonterra chairman Sir Henry van der Heyden then led the co-operative’s board to come up with a new plan to encourage further shareholder investment by increasing the share base with restricted trade among farmers. The first stage of this process was agreed to by farmers this month.

The taskforce said that while the choice was in the hands of farmers, the government needed to put pressure on to change.

“No consideration of accommodation for Fonterra on any other front should be countenanced until the transformation of the company is irreversibly underway.”

The 2025 Taskforce was created to look at ways to reduce the income gap between New Zealand and Australia by 2025.