Resignation over TAF 'the right thing', Fonterra chairman says

BUSINESSDESK: Fonterra chairman Sir Henry van der Heyden has welcomed the resignation of the chairman of the watchdog Shareholders' Council, saying Simon Couper had "done the right thing by the co-operative".

Mr Couper resigned today after a meeting at which the 35-member Shareholders Council voted by what Sir Henry said was a majority "north of 80%" to support Trading Among Farmers, a scheme to issue non-voting dividend-bearing tradeable securities on the NZX to allow the co-operative dairy giant to manage its balance sheet more efficiently.

The issue is contentious because of fears it could effectively transfer influence outside the 10,500 farmer shareholder base.

"I've made no secret that milk price and fund size are the key drivers," Mr Couper told BusinessDesk. While Fonterra had "gone some way in alleviating other concerns", it had not, in his opinion, gone far enough.

"I had told shareholders in print several times about how 100% ownership and control was something I stood for and believe that we needed to deliver. I do not feel the controls are in place to deliver that."

The situation was "not ideal", Sir Henry told BusinessDesk. "But hey, I'm delighted about where the Shareholders Council got to", with replacement chairman Ian Brown reporting "a very strong" mandate from the rest of the council.

"I don't know exactly what the number are, but north of 80%," he said.

The numbers are important because at least some of the votes at a special shareholders' meeting on June 25 to approve TAF will require 75% majority support and involve constitutional change.

Legislation supporting TAF is also required as one of five "bottom lines" to be achieved before the vote. The assurance of 100% ongoing farmer control is another.

Mr Brown issued a statement saying the council "overwhelmingly resolved to support" TAF after doing its own due diligence on the package, which will be mailed to Fonterra farmers at the end of next week.

Sir Henry said he regretted Mr Couper's decision, but supported his decision to resign.

"If Simon is uncomfortable, he has done the right thing by the co-operative. Everyone's got to make their own judgement call and if he can't live there, I accept that. He deserves a pat on the back."

The council had "pulled out all stops to complete their due diligence on TAF in order to provide shareholders with their independent evaluation of the package before farmers have their final vote on June 25", Sir Henry said in a statement.

“When we are making such a significant decision to protect the co-operative, it is important the board and council are able to stand shoulder to shoulder. So the board is delighted to have council’s support.

“When we announced the special meeting we said that we wanted to have this final vote to unify the co-operative. With board and council unified on TAF we are now a long way down that track.”

A notice of meeting pack will be mailed to shareholders at the end of next week and Fonterra has been lobbying intensely at Parliament in support of the Dairy Industry Restructuring Bill, including a briefing for a sceptical Labour Party caucus next Tuesday.