Fonterra director election changes announced

08 JULY 2019

FONTERRA DIRECTOR ELECTION CHANGES ANNOUNCED

Today, a joint committee of the Fonterra Board and Shareholders’ Council updated farmer-
owners on changes to the Director election process.
The Director Election Review Committee was established in March to review what aspects, if
any, of the Director election process could be improved. The Committee sought feedback from
farmers via an electronic survey and considered this alongside farmer feedback received since
the 2016 Governance and Representation Review changes came into effect.
The key principles identified from farmer feedback were:
• The election process should be simplified as much as possible
• Independence and transparency of the process should be protected and enhanced
• Farmers strongly value information about the skills and attributes required by the Board
• Farmers strongly value the independent assessment of the skills and attributes of
individual candidates
• Farmers want a choice of candidates to be put forward by the Independent Selection
Panel
• Only farmers should have the power to remove a sitting Director standing for re-election.
After thorough consideration alongside governance best practice, the Committee put forward a
number of recommendations to the full Board and Shareholders' Council. It also consulted with
the Independent Selection Panel and the Returning Officer.

The following changes to the Director election process have been agreed:
1. To better characterise the two different ways that farmers can stand for the Board, the
Independent Nomination Process and Self-Nomination Process will be renamed to refer to
'Independently Assessed Candidates' and 'Non-Assessed Candidates' respectively.

Fonterra Co-operative Group
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2. To improve the independence and transparency of the newly named 'Independent
Assessment Process':
a. All candidates recommended by the Independent Selection Panel will go directly
through to the ballot without any further review or nomination by the Board and its
Nominations Committee (which will be dis-established), or approval by the
Shareholders' Council. The Shareholders' Council will remain responsible for
running the Director Elections as required by the Constitution.
b. A stand-down period will be introduced for sitting Shareholders' Councillors which
will prevent them from standing for the Board in the same election cycle in which
they step-off the Shareholders' Council.
3. To provide farmers with a choice of candidates, the Independent Selection Panel will now
put forward candidates up to a maximum of the number of vacancies to be filled plus two.
There remains no limit on the number of farmers standing as Non-Assessed candidates.
a. Associated with this change is the decision to remove the 50% support benchmark
for contested elections. In contested elections (where farmers have a choice of
candidates), the candidates with the highest number of votes will now be elected to
the Board (up to the number of vacancies).
b. For an uncontested election (when there are not more candidates than vacancies)
candidates must still gain more than 50% support to be elected. If one or more
candidates in an uncontested election does not achieve that threshold, a second
election will not be held. The Board will retain its existing power to fill any such
vacancy by appointing a 'farmer' director for the period up to the end of the next
Annual Meeting (and it must appoint if a vacancy will continue for six months or
more), and may not appoint an unsuccessful candidate standing in the first election.
4. To ensure that only farmers have the power to remove a sitting Director standing for
re-election, Board endorsement of incumbent Directors seeking re-election has been
removed. Now, incumbent Directors seeking re-election who go through the Assessed
Candidates process will automatically go through to the ballot, regardless of the
Independent Selection Panel's assessment of them.
5. The names of the 35 supporting Shareholders for Non-Assessed Candidates will no longer
be published.

Next steps:
These changes do not require amendments to our constitution. They will be in place for this
year's 2019 Director Election process, except for the changes relating to the Shareholders'
Council included in 2a) and 2b). These recommendations require changes to the Shareholders'
Council by-laws, which will be sought at this year's Annual Meeting (which will be held after this

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year's election).

The five-year review required under the 2016 Governance and Representation (GRR) changes
will still occur, no later than the 2021 Annual Meeting.

-ENDS-

For further information contact:

Natalie Dyer
Communications Specialist
Shareholders’ Council
Phone: +64 021 555 874