Why Fonterra's TAF rebel should be heard

Opinion: Parliament's Primary Production Committee needs to urgently call back ex-Fonterra Shareholders' Council chair, who resigned over TAF concerns

24th May 12, 5:31pm by Alex Tarrant

By Alex Tarrant

Forget the Budget. The biggest news today is the resignation of Fonterra Shareholders' Council chair Simon Couper over concerns he has about Trading Among Farmers.

Parliament's Primary Production Select Committee needs to urgently call Couper back in front of it to ask him what those concerns were. They must demand Couper let it all out.

Last month, Couper represented the Council at the Committee as it heard submissions about amendments to the Dairy Industry Restructuring Act (DIRA), which will allow for TAF to be implemented.

Couper, and vice-chair Ian Brown (now chair), arrived with, and submitted alongside, Fonterra big-wigs Henry van der Heyden and Theo Spierings. It all seemed much more cosy than I expected it to be.

Talking to media outside, the Council said it supported the process of TAF, and would not elaborate on that. Couper said the Council had not yet done its due diligence on TAF so would not be commenting further. He appeared media-shy. Those were the reasons I put down for him not answering too many questions about the Council's position on TAF.

Now the Council has done its due diligence, and Couper has resigned. Shortly after, Brown as the new chair issued a release saying the Council "overwhelmingly resolved" to support the introduction of TAF.

In its release, the Council said it had been "deeply involved at all stages" with TAF, "and has also conducted its own due diligence process with independent advisors involved."

For the chair of that Council to then resign over concerns he still has with the scheme is big news.

Perhaps Couper is a lone-wolf and TAF should go forward.

That's entirely plausible. But the Primary Production Committee needs to find out why he resigned. They need to call him back. As soon as possible.

But from the matey-ness the National members of the Primary Production Committee showed towards van der Heyden, I'm not holding my breath.

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25 Comments

by Omnologo | 24th May 12, 9:36pm 1337852195

Hi Alex, hope alls well.TAF Rebel, you're journalism is imbued with more sensationalism and absurdity than Fran O'Sullivans' efforts. Like Frans though it makes for entertaining reading.

Thank you for giving this the interest it deserves. It is significant for NZ, and if you've been reading related threads you will understand that Simon Couper is not a lone wolf.

Simon has been under hugh pressure from Henry and his acolytes within the shareholders council. I'm suppossing his superior intelligence and conscience led him to resign in what is becoming a debacle, embarrassment and tradgedy for dairy farmers and NZ in general.

In your experience with politicians in Wellington, what do you make of Henry's matiness? Was his submission well founded, intelligent and clearly articulated, or glossy corporate flim flam interspersed with matey banter?

Do you see the NZ dairy industry contributing to the ongoing development of the NZ economy, how, and will TAF ensure this is achieved?

by Alex Tarrant | 24th May 12, 10:07pm 1337854036

Hi Omno,

Doing well thanks, yourself? TAF rebel was Bernard's headline ;) He is though isn't he? Seeing as the Council came out an hour later to say they overwhelmingly endorsed it.

I know he's not a lone-wolf among farmers, but it seems the rest of the Council is happy to let things go through - are they able to interpret the due diligence better than Simon, or are just box-tickers for the board? Perhaps the due diligence was good and allayed all fears except Simon's? I don't know because I haven't seen it.

It all just felt a little awkward at the select committee last month. They all arrived together, sat together, left together (they were there to make separate submissions - Fonterra then the Council).

And then afterwards Couper was very reluctant in what he would say.

The National members of the committee (and they control the committee) certainly were warmer towards van der Heyden and the Fonterra execs than the Opposition members.

Seeing as we know Couper had reservations about the scheme, and that he was probably closest to the work/negotiations/facts as he was chair of the council, I reckon the Select Committee should call him back (you have to appear when called in front of one).

It might be that Simon's concerns are misplaced. Or he might feel more comfortable now to reveal a whole lot more than he was willing to as chair of the Council (seeing as he had to represent the council, not just himself).

Better safe than sorry I'd say.

No more from me tonight sorry - got the finance minister at 7am tomorrow. Will check in again then.

Cheers

Alex

by Omnologo | 24th May 12, 10:26pm 1337855191

When putting it like that Alex, TAF Rebel is a superb headline. you've come up with some perceptive issues and important questions, and you probably know my opinion by now, so gracias, buenas noches y saludos.

by Micks | 25th May 12, 8:24am 1337891094

Good point Alex - this one smells like blue cheese to me.

Will there be an 'independent expert' report of TAF provided to Fonterra shareholders prior to the vote. If this was a public company it would be needed. Since Fonterra is by far NZ's biggest company this should be the case. Otherwise the farmers are being given advice by Fonterrra directors etc. who make be motivated for their own gain rather than for the benefit of all shareholders. This proposal needs far more scrutiny and political deals behind closed doors isn't good enough.

by scarfie | 25th May 12, 10:12am 1337897547

I saw the call for you to follow through on this Alex, so good on you for doing so. I have no direct interest, but from what I can see I think every New Zealander could be affected by the outcome given some of the comments by some here. I was particularly disturbed by Iconoclast laying out the real danger a couple of weeks back.

by poppy | 26th May 12, 9:00am 1337979612

Alex, you said "And then afterwards Couper was very reluctant in what he would say"

I suggest reluctance is your interpretation and it's more likely he spoke with thought and care, respectful of the boundaires of his role.

Agree primary production committee needs to call him back. Being one of the few who has had the opportunity to study the detail Fonterra's farmers too deserve to hear more from him.

Fonterra's constitutional powers to oversee TAF and the ability for overarching laws (like DIRA or around economic rights of shareholders) to stuff things up down the track is the conerstone of debate. No co-op in the world has yet managed such a move. Facts needed, not opinions of those with bias.

by Omnologo | 26th May 12, 6:06pm 1338012403

Greetings, hope all is well.

Yes Poppy, from the little I know of Simon in his role as council chairman, he was intelligent, balanced and considered in thought.

It's understandable Alex sensing the discord between Simon, and others concurrently delivering a submission to the select committee. He resigned because he wasn't comfortable with the effect of TAF as currently proposed, on the stability and continuance of Fonterra as a cooperative. The same concern as many in the shareholder base feel. It is damning indictment of the Fonterra board and leadership claiming minimal opposition. Tragi'comic, particularly when considering the apparent sincerity of leadership and lackeys in placating shareholders with ‘genuine’ concern in preserving the cooperative dairy industry. And the new council chairmen claims overwhelming support for the board in there wish to implement TAF....yeah right:-)

A question! I sense a consistent theme in media, that Fonterra shareholders opposing TAF are ignorant in their distaste of accepting external capital and ceding economic sovereignty. Recent examples Fran O'Sullivan (Herald, surprise surprise), Editorial Walkato Times, Fairfax (nom de plome 'Chalkie' in Waikato Times). Links if interested.

http://www.stuff.co.nz/waikato-times/opinion/editorials/6963253/Editorial-Fonterras-big-dilemma

http://www.stuff.co.nz/business/opinion/6968012/Cold-feet-in-Fonterra-betrothal

http://www.nzherald.co.nz/best-of-business-analysis/news/article.cfm?c_id=1501241&objectid=10807697

Any benefits mentioned are without foundation. Can anyone provide an example of where a cooperative, preferably primary producer has accepted external investment and gone on to prosper whilst maintaining cooperative principles and values?

by Henry_Tull | 26th May 12, 7:45pm 1338018337

Right again, where is the evidence based analysis.

By how many dollars will our milk price and/or dividend benefit...

Compare the steady-state case with the with TAF case.

if not, why not...

by Henry_Tull | 29th May 12, 8:02am 1338235344

What were desperately needed were "cold hard facts" about the value proposition TAF offered to farmer-shareholders, Leferink said.....

"Simon is a man of honour and it speaks volumes that he stuck to his guns under what is an intense pressure-cooker environment," Leferink said. "The lobbying is frankly unbelievable from all sides.".....

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…

by Christov | 29th May 12, 8:52am 1338238378

Henry T. just in case you have not glanced over it....http://www.fonterra.com/wps/wcm/connect/fonterracom/fonterra.com/Our+Business/Shareholder+Centre/Capital+Structure/

A point of interest is the appointed Market Maker (Registered Volume Provider.) ?

RVP in the vanacular is likely to be Who..? looking to profit on the Bid offer spread.......

by Casual Observer | 29th May 12, 2:34pm 1338258871

Assuming they get the $500m, the whole things seems to hinge on Craigs (the RVP) ability to make it all work. We've been told that their margin is 'very small'. ;-)

by Henry_Tull | 30th May 12, 10:46pm 1338374807

The process shows the strength of the co-operative system, writes Sir Henry van der Heyden, chairman of Fonterra .......... Listening has been a huge part of the process.

www.interest.co.nz/rural-news/58964/businessdesk-fonterra-blames-media-savvy-minority-extra-vote-taf

Taking the time to do it, and to respond to what's being said, is a real co-operative strength and long may it stay so.

Whatever the final vote result, you can't say we haven't thought about it.

www.nzherald.co.nz/agriculture/news/article.cfm?c_id=16&objectid=108090…

and so it goes on...

by Christov | 31st May 12, 8:17am 1338409067

Henry T.....the following will be the understatement of the year starting around June 6th.

We have some important weeks ahead of us.

Shareholders will be trying to work through payout forecasts which have taken some of the edge off farmer optimism and the market uncertainty which has seen dairy prices fall.

These conditions are a reminder - though not overly welcome - that volatility is always part of our industry. While long-term prospects remain good, ups and downs will need to be weathered.

Yes they may be listening , but will be very aware of the timing of the TAF vote in relation to external pressure on the Dairy Industry that may affect the voting strategy of heavily leveraged Farmers.

by Henry_Tull | 31st May 12, 8:29am 1338409776

Agree, there are many individual cases that demonstrate your comment, think of the way fonterra insiders have "geared up".

Re-visit the refinance public detail of Dairy Holdings - remember large % sharemilkers who seem to be DHL operations mgt as well.

One could imagine bankers assuming a TAF related share deal would see them get some funds back..

by Omnologo | 31st May 12, 9:11am 1338412264

I don't know what to make of this. In his flawed and misleading determination to press ahead with TAF and bury Fonterra as a cooperative, one minute Henry is falling back on the vote in 2010 and dismissing critics as a vocal minority , next minute he is extolling one of the virtues of a cooperative in ensuring a robust, transparent and solid process. I honestly don't know what to think. Many shareholders venerate the man, he's been an industry leader since his 20s, he's on a $400,000.00/annum chairmans stipend. Surely he is genuine and competent. But I fear not!

One thing is for sure, all directors have used the generations of cooperative wealth transfered to their balance sheets to leverage aggresively, after all gods not making more land (nee water, oil, phophate etc). This has also been mimicked by many in the industry. Don't know how the dairy holdings saga fits into this. Colin Armer, along with his wife Dale, has a 60% shareholding. He runs a lean and profitable model, based on maximising production/hectare, with minimal costs. Banks eat out of his hand.

Interesting to note throughout history of Fonterra, most independent directors are associated with the big4 in the banking industry.

by Stephen Hulme | 31st May 12, 9:48am 1338414489

Interesting to note throughout history of Fonterra, most independent directors are associated with the big4 in the banking industry.

That statement Omnologo is the oxymoron of the year and deserves some serious investigation by the authorities, if not the fraud squad.

Hardly an atmosphere of cooperation, more like coercion.

by iconoclast | 31st May 12, 10:06am 1338415581

Omno: That needs serious clarification. When you refer to "independent directors" are you referring to the 9 "shareholders council" appointees? If so, you have a problem in your ranks.

by Omnologo | 31st May 12, 10:34am 1338417241

Non elected independents on the board. At the risk of propogating divisive inuendo, it's just an unverified observation, in an attempt to understand motivation for TAF in context of current status of dairy industry and board members own positions. My personal opinion is that TAF will bury the cooperative structure, consigning primary producers like myself to the bottom of the heap, and contribute to the undermining of farming and the NZ economy. I want to be able to understand the rational of those that think otherwise.

Fonterra shareholders have used the capital transfered to their own balance sheets from generations of cooperative development to further leverage their business to marginal positions. If this isn't an exageration, there will naturally be issues within the ranks.

by Henry_Tull | 31st May 12, 10:34am 1338417272

Think how NZ Dairies (in rec'ship) suppliers are feeling......

by Omnologo | 31st May 12, 11:34am 1338420870

Sorry Henry_Tull, I don't understand. Surely NZ Dairy suppliers new the risks of supplying an investor company, particularly those who sold Fonterra shares to do so, remembering the capital behind those shares wasn't theirs to sell?

by Henry_Tull | 31st May 12, 1:52pm 1338429124

Thats the point. The value of a large classic co-op structure seems to have been underestimated in the area of counterparty risk/payment risk.

I have listened to sales/syndicators/lenders explain away (the fact of an independent not being fonterra) by saying "an independent would dare not pay its farmers".....

Your point of co-op capital is very real.

I also tend toward the school of thinking that a co-op share is worth what that supplier paid for it. And that its a share in name, not the same as a company/equity share...

A co-op "share" is different...

by Belle | 31st May 12, 9:38am 1338413893

Yes very interesting,I currently have dealings with one of these gods mentioned. Contractor tax withheld and not paid to the ird. Usually there is one of two reasons, there are no funds, or mismanagement. Gods indeed!

by goldenfox | 31st May 12, 11:07am 1338419227

Alex, have you managed to get in contact with Simon Cooper? Any chance of a real media statement or even interview? or has he gone bush?'

Has Alan Robb or Tony Baldwin spoken up with any comments on TAF?

by Omnologo | 31st May 12, 11:35am 1338420929

It would be nice to know Allan Robbs opinion; who is Tony Baldwin?

by neco | 31st May 12, 11:52am 1338421931

@goldenfox:

http://www.radionz.co.nz/national/programmes/morningreport/audio/2519897/fonterra-shareholders'-council-chair-quits