NZSA has been vocal about the relevance of the Fonterra Shareholders’ Fund (FSF). We were supportive of Chair John Shewan’s call for Fonterra Co-operative Group (FCG) to buy out the Fund. This was further highlighted by changes to the FCG constitution approved by shareholders in December 2021; among other changes, this reduced the maximum possible investment able to be held by the FSF. That may be a moot point; the FSF is nowhere near that limit, and continues to decrease in relevance.
But the symbolism for shareholders is clear – FCG operates in the interests of farmer-suppliers, not shareholders. This was an inadvertent admission made in conversations between the company and NZSA last year, with a company representative stating that the aim of FCG was to optimise value for farmers “across farm gate price and shareholding“.
It is clear that the well-intended controls established at the time of establishment of the Fund (including reference price benchmarks and the ability for Commerce Commission review) have failed to curb the natural incentive for FCG to operate in farmer-suppliers interests.
NZSA believes it is time for the FSF to disappear and for FCG to take the lead in buying out current shareholders in the Fund.
If FCG and its farmer-shareholders want to act in the best interests of farmers, that is not for NZSA to question – but if that is the case, then retail shareholders (nor institutional shareholders for that matter) should be exposed to the impacts of that decision.