If you like Fonterra as a co-op, vote no at the annual meeting

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OPINION: Probably one of the most important votes the individual shareholders of Fonterra Dairy Co-operative, New Zealand's largest company, have to make, occurs on Wednesday, November 18 in Ashburton, at the AGM or by proxy vote.

This decision, requiring a 75 per cent majority, will set the future path for our co-operative forever.

The three points of discussion in the capital structure booklet are reasonably well known by shareholders, and on the surface perhaps look innocent enough - and for the wider public they are:

More capital from shareholders by way of 120 per cent of production in shares.

Change to the valuing method of those shares.

How those shares might be traded.

Fairly straight forward you might say, and of no great consequence perhaps? But let's look at the first point, for this irrevocably changes the essence of the co-op.

To look at what it means to be a co-op, in its pure sense, is working together for the same end, or put another way, collective pooling of our resources to maximise our profits. Arggh profits! Because at the end of the day, this is what it is all about - a sort of capitalism.

In this first proposal, the fact that there is 2 per cent more shares, not held equally by all members (for it is not compulsory and only those who can afford them will hold them), goes against the co-operative principle of collective pooling.

And what about the second co-op principle of maximising profits? Well of course there is and there isn't. At one end is the person who hasn't taken the shares paying for the person at the other end who has, for the money to pay the dividend for those shares comes from the one pool of money.

Already there is talk of having a favourable bank manager who will lend you the money to buy the shares at say 7 per cent interest knowing that at the moment you will get a stated dividend return of 11 per cent, making a cool 4 per cent for doing nothing.

This I consider is a very unco- operative principle and is cross- subsidy from one member to another. You can look at it any way you like and say the whole pool is growing etc, therefore everyone benefits, but the above facts still remain: there is unequal benefit.

Briefly, the average farmer of 100,000kg/ms could be worse off by $9000 a year at current pricing in the simplest form. But the amount varies by the number of dry shares, obviously, and it could be more. Lost in the small print, for example, if production increases and is not covered by shares, then only a milk price will be paid.

Points 2 and 3 in the capital structure, those in regard to the fair value share and trading of shares, have their own problems.

All I have to say at the moment about that is: if the one pillar of defining a co-op is brought down (that of pooling resources) then the third pillar of fair exit, is already compromised.

I have felt a need to write this because I am appalled by, in my opinion, the lack of fair and balanced consultation on this important subject one which has been tinkered with all over the place as a plaything by our chairman, Sir Henry Van der Heyden.

While these might be strong words the so-called discussion and consultation was a farce. The meeting I went to was nothing more than a company indoctrination of their points of view. There have been no personal company newsletters to suppliers, and indeed only today I read in a newspaper there is to be a vote on this capital structure at the AGM along with more propaganda from the chairman pushing his view.

There is a solution to our capital structure, but it is not to be found in these current proposals, and only a NO vote will see the co-op regain its strength and go forward, not fragmented and changed forever.

Taranaki farmer meetings to discuss Fonterra's proposed capital structure changes will be held on Monday, November 9, at Southgate Hawera 10am, Stratford Memorial Centre 1.30pm, Quality Hotel New Plymouth 7pm; and on Thursday, November 12 at the Okato Rugby Club rooms 10.30am.

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