An agricultural consultant says Fonterra should not need to bring in consultants to review and restructure the company.
Left to right: Fonterra chairman John Wilson, chief executive Theo Spierings and chief financial officer Lukas Paravicini Photo: RNZ / Kim Baker Wilson
The dairy giant has instituted what it calls a performance improvement programme called Velocity and has hired consultancy McKinsey, which specialises in helping distressed companies to restructure.
In a statement, Fonterra said the programme was a re-set focusing on performance and generating more cash for farmers by improving efficiency and lowering costs.
Fonterra, which employs 18,000 people globally, has 17 staff earning more than $1 million a year.
Will Wilson, who part-owns a dairy farm and has previously been on the National Council Board of the Institute of Directors, said there was enough expertise within Fonterra to conduct the review itself.
"Clearly something is wrong in terms of being able to get this business to perform and the buck stops at the board," he said.
"It's ironic that they've engaged an outside company to come in and try and identify things and call it recovery and transformation. It is beyond my thinking to expect that sort of work to be undertaken by a third party.
"I was always of the view that we actually have a reasonably competent and smart board and we certainly, if remuneration is a factor, are employing some pretty good executives within the company. Why are they not identifying the issues of this company's performance and addressing them with urgency themselves?"
Mr Wilson said Fonterra needed to separate its commodity-based business from the value-added part of the company that produces consumer-ready products.
"It's quite clear that they're running a corporate model that's aligned with a value-added-based business as opposed to the majority of its business, which is in fact a commodity-based business," he said.
"In a commodity-based business, the absolute key factors of the operation are efficiency and effectiveness of the cost structure.
"It appears to me that the cost structure associated with the value-added business has been moved across the commodity-based business and, as such, with the majority of its business being commodity-based, [it] in fact has lost the efficiency."
Fonterra said it would present the progress of its internal review to farmers at its AGM in November.
