Fonterra governors seek pay rises as financial performance improves

Fonterra governance fees are on the rise after an unofficial moratorium following disastrous 2018 and 2019 financial results which wiped $4 billion off farmer-shareholder balance sheets.

Also pitching for a pay rise and a budget lift is the council of dairy farmers elected byFonterra’s farmer-owners to safeguard their interests.

Farmer-shareholders at next month’s annual meeting of New Zealand biggest business will be asked to approve a $25,000 annual pay rise for chairman Peter McBride, taking his annual remuneration to $455,000, likely making him the country’s highest-paid companychair. A former Zespri chair, he joined Fonterra’s top table in 2018 and was appointed chair last year.

Fonterra directors have not had a pay rise since 2017, according to the company. Pandemic uncertainty has also kept the lid on director fees.

A $10,000 increase is sought for each of Fonterra’s other 10 directors, which would take their annual fee to $185,000. Chairs of Fonterra board committees may be paid an additional $35,000 – McBride excepted – but there’s no proposal to increase that fee.

A boost of $75,000 is proposed for a remuneration fund for directors taking on additional workloads and responsibilities. If the increase is approved, this fund would total up to $150,00 a year in aggregate.

The annual meeting agenda says “the need to attract and retain high quality governors and the substantial director workload” makes the “larger one-off adjustment” appropriate.

Fonterra, the world’s sixth biggest dairy company by revenue, has seven farmer-shareholder directors and four independent appointees. The cooperative’s board isproposing a major capital restructure, the work for which has been underway for at least two years. Fonterra’s 10,000 farmer-shareholders will be called on to vote 75 per cent in support of the re-jig next month.

With Fonterra farmers enjoying buoyant farmgate milk payments due to global dairy market demand, and the company’s reset business strategy under new senior management and a largely new board producing a recovery in the balance sheet, the pay rise requests should be a shoo-in.

Also asking for a pay rise and a lift in its annual farmer-funded budget to $3.2m is the Fonterra Cooperative Council.

The job of this organisation of 25 farmer-elected farmers is to represent farmer-shareholder interests. Until last year when grumpy shareholders forced a review of its costly reason-for-being, which led to some reform, it was known as the Fonterra Shareholders’ Council.

The review followed Fonterra’s net losses of $196m in 2018 and $605m in 2019. Critics estimated farmers had paid around $50m to the council since Fonterra was created in 2001. Its annual budget had rarely dipped below $3m. The FY22 budget request is for $3.2m.

The annual meeting papers ask for a $10,000 increase to $110,000 a year for the council chair, and a rise of $2500 to $37,500 for councillors.

Their last increase was also in 2017.

Approval is also requested for up to $100,000 a year extra in aggregate to be provided for honoraria of councillors for extra responsibilities. The council chair isn’t entitled to such an extra payment, which is limited to $17,500 more per person per year.

The council is asking for farmer-shareholders to approve a budget of $3.2m for FY22.

This is made up of an operating budget of $2.4m plus $792,000 for other costs.

The council’s actual budget for FY21 was $2.9m. It had budgeted for $3.1m.

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