Rising to the top in the milk trade

ANDREA FOX
Last updated 05:00 18/08/2012
Fonterra
FAIRFAX NZ
HOT SEAT: Leading Fonterra chairman-in-waiting John Wilson says he can’t possibly have a strong personality: ‘‘I have four daughters. I get pushed around constantly.’’

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"I hate this stuff,” says the likely next chairman of New Zealand's biggest company, Fonterra.

John Wilson is on the spot, at his own dining table in his own farm homestead south of Kihikihi, south of Te Awamutu in the mighty Waikato.

The hated stuff is not the prospect of being Sir Henry van der Heyden's successor at the top table of the $20 billion a year dairy juggernaut - that's providing he's re-elected to the board by farmers this year - but talking about himself.

He can't have done much of that in the nine years he's been on the Fonterra board, because the first thing farmers tend to say about the 48-year-old father of four is that they don't know him.

In a co-operative of 10,500-odd farmers that calls itself “a family”, that's quite a verdict. Every farmer knows van der Heyden - every farmer has his mobile number.

The second thing people say about Wilson is that he's bright, very bright.

And the third? That he's a bit too arrogant.

Wilson laughs. He's heard - and read - it all before. He reckons the reporter must “be talking to the wrong people” - on all counts.

Another popular impression, that Wilson is “Henry's man”, also raises a laugh, but with a hint of flint this time.

Wilson was the first chairman of Fonterra's first shareholder council, set up to be the shareholders' watchdog after Fonterra was formed in 2001 from a huge industry merger.

So he really shouldn't be a stranger to the shareholder base outside his own Te Awamutu farmer ward electorate.

But Wilson, who recalls he had to be “dragged out of the cowshed” to head the council, was in the job a mere year before he was catapulted on to the board of Fonterra itself.

Since then he's kept a pretty low profile - though inside the company he's been a powerhouse, driving capital structure change. The name Wilson is synonymous with the contentious TAF scheme (share trading among farmers).

Van der Heyden says Wilson may not be well known because a sign of good governance is that the chairman “carries 90 to 99 per cent of the front of the company”.

On the suggestion of arrogance, there's no doubt the years have mellowed Wilson. Van der Heyden again: “As you get older you mature. People used to say I was really hard-nosed, black and white etc.”

Wilson's likely election as next chairman was predictable. Industry scuttlebutt is that van der Heyden has been grooming him as his successor for years - hence the label “Henry's man”.

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Rumour also had it that big-scale farmer and farmer-director Colin Armer fancied his chances. That Armer quit the board days after Wilson's election was announced seems to nail the speculation.

Van der Heyden laughed loudly at the suggestion Wilson is some sort of facsimile of him. “John's an independent person.”

Wilson didn't bother to dignify it with a response.

Sure, there are flashes of van der Heyden in his choice of words when talking about Fonterra, but Wilson reeks of leadership material.

There's a solidity and an intensity about him that suggests he will drive Fonterra strongly. By his own admission he likes to get things done. And he says it's “critical we look out at the world again. We have to externalise again.”

“We've spent the last three years looking at our bellies,” he says of the tortuous TAF process, though for a cooperative it was a necessary debate, in his book.

As Wilson relaxes into the interview, a bit of self-deprecation and humour shows through.

He can't possibly have a strong personality, he says.

“I have four daughters. I get pushed around constantly. I'm bottom of the pecking order.

“I'm a shy retiring sort of bloke. I am sure farmers will come to their own view about whether I have the right leadership style.”

As for the “very bright” charge, Wilson responds that “Henry has asked me to do stuff”.

“The milk price thing - he threw that at me and that was quite a chunky piece of work.”

That "milk price thing" was formulating Fonterra's milk pricing - an area of intense interest to farmers, for whom it is their business lifeblood; to the government, which legislates Fonterra; to the Commerce Commission, which makes sure Fonterra doesn't throw its huge market weight around; to processing competitors, who have to buy its milk; and to the public.

The only other comment Wilson will make on salutes to his cerebral energy is that he thinks he has “a pretty strategic mind”.

Part of the reason the interview is so personal is that Wilson, from the get-go, says he won't discuss Fonterra issues or strategy.

He still has to be re-elected - it's his turn to contest his board seat this year - and van der Heyden is the chairman until the annual meeting in November. The two are working together on the transition, and it's an important process for Wilson.

“I'm not someone who just charges out there. Over the next little period it's all about the transition, but going forward I think you will find me quite clear on what is important to Fonterra,” he says in a very leaderly kind of way.

Wilson makes a bit of a big deal about the need to be re-elected first but it's a pretty safe bet.

Yes, there is still disturbance in the force over TAF, of which he is a prominent co-architect.

With its inherent invitation to the public to invest in dividend-carrying but non-voting units of farmer-owned Fonterra shares, TAF is considered by a vocal bloc of resentful farmers to be a clear and present danger to future 100 per cent farmer ownership and control of the company.

The cooperative has been fractured by TAF - the proposal got through on a recent vote by just 66 per cent of milk solids voted. Fonterra won't reveal the individual voting numbers.

But Wilson reckons it was a “convincing” vote and snorts at the suggestion he could be punished at the farmer ballot box by the further destabilisation of Armer's shock exit.

In truth, he can probably afford to snort at both suggested threats.

Dairy industry politics being what they are, the big-herd owners vote that ensured TAF was driven through will also be marshalled to ensure the heir-apparent is re-elected to the board.

Wilson seems confident that in 18 months' time farmers will have “a huge amount of comfort” that the board made the right call in introducing TAF.

“I absolutely get the apprehension, and I really respect all the different views around TAF.

“But the most critical point is that we come out with a unified cooperative. That's easy to talk about but it's about all of us delivering a unified cooperative over the next six months or so.

“I have real confidence we will get there.”

How's he going to deliver that unity?

“It's a bit of a cliche but it is a bit of listening, a lot of consistency and it's about delivering TAF.”

TAF was dreamed up in the name of freeing Fonterra from the spectre of a run on its balance sheet by farmers wanting to exit, or reduce milk supply. Fonterra's shares are linked to milk supplied and are traded by the company, not in a market. One drought year the board had to write a cheque for more than $600 million to farmers. The board wanted permanent capital so management had the confidence to pursue its global strategy.

Farmers, it was deemed, could not provide this permanent capital - a suggestion still disputed by many - so the company decided to have a bob each way. It would keep the co-operative faith with a capital structure that enables only farmers to own shares and vote, but would also give a (hopefully) hungry public a taste of New Zealand's biggest earning export through units from a Fonterra Shareholders Fund. This fund will be created from shares farmers had cashed in. There will be a separate trading market for farmer shares. Some in the industry believe it an “elegant” solution; others condemn it as a clunky hybrid that is privatisation by stealth: NZX-listed Fonterra units today; a full listing tomorrow?

Only time will tell. Meanwhile, the sodden misery of calving in the nationwide Big Wet has dampened the critics' fire.

“If we've missed something can we turn the clock back? Yes we can," says Wilson. "Do we think that's likely? No, we think we have considered everything. We have considered all the things which could trip us up, but if there is something that catches up and smacks us on the back of the head we will deal with it at that stage.”

Van der Heyden, who's been accused by critics of having spent most of his 10 years at the head of Fonterra trying to privatise the co-op, says no-one is more committed to a co-operative Fonterra than Wilson, although he is not always perceived that way.

“He's been involved in the dairy industry a long, long time. I don't think there is a farmer-director who understands Fonterra as well.”

Wilson's certainly passionate.

“I want to engage . . . It's about being prepared to lead debate and discussion, and listen, and then move forward with clarity.

“Clarity to me is critical - we talk about our co-operative as the 10,500 farmers, but there is also all the staff on those farms and the communities they live in and our 16,000 employees.

“It's a lot bigger than the farmer side. It's an entire ecosystem that is Fonterra.”

Wilson says his values mirror the company's.

“The co-operative spirit. Do what's right, make it happen, challenge boundaries.

“It's stuff that I stand for, stuff we do in our business. Good New Zealand values.”

But he also knows he has to earn the respect of farmers by being clear and consistent.

The strength of Fonterra, he says, is that it enables farmers.

“So whether you want to aggressively grow your business or be very focused on other aspects of business, or put huge energy into family or recreation, then dairy farming and the co-operative nature of Fonterra allows people to pursue their own goals and objectives.”

Wilson says that bottom line, he's a farmer.

“My upbringing, from working my life on a farm, from the days of pushing every last kilogram of milk solids - it was butter fat then - into the world, means I think I have a very good affinity and understanding of the different goals and objectives of our farmers.

“Whether it was working as a hay boy on farms around the country or working on a dairy company site as a student to chairing the council . . . my real passion is around farm productivity."

The greatest issue at Fonterra, Wilson believes, is its future governance.

“That's the critical thing, to get it right. From the council ensuring there is a governance development programme to the board and making sure all directors have a chance to be developed.”

Expect chairman Wilson to grab the environmental sustainability issue with both hands.

“We have to take on the whole sustainability, environmental responsibility challenge at every single level. It's an opportunity. It's something we can lead the world on.”

What keeps him awake at night?

“Food safety. Knowing you have a whole lot of great people around the world and farmers doing their best.

“And making sure that our people go home safe to their families at night.”

And what gets him out of bed? The potential of the “great product” Fonterra farmers can offer “a world screaming out for resources around food and water”.

“Driving to Auckland at a quarter past five this morning, you're driving past all your mates and they're all out milking and you know you have to get it right or you're going to get a smack in the back of the head next time you see them.”

JOHN WILSON 48

Educated: Auckland Grammar Massey University BAgSci Lives: Waikato Director Fonterra – 9 years Fonterra milk price panel Chair: capital structure committee Director Turners & Growers Large-scale farmer Waikato/Sth Canterbury

- © Fairfax NZ News

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