Communication to Fonterra farmers

7 September 2023

Communication to Fonterra farmers

The attached communication was provided to Fonterra Co-operative Group Limited farmers by the Chair ,
Peter McBride, on 7 September 2023.

ENDS

For further information contact:

Fonterra Communications
24-hour media line
Phone: +64 21 507 072

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Update from the Chairman: Board size and composition
Kia ora
As part of earlier governance and representation reviews a commitment was made to review
our Board size and composition in 2024.
Since the Co-op’s formation it has been envisaged that the Board size would be rationalised
over time. With the Capital Structure review, asset divestment programme and long term
strategy work largely behind us, the Board believes it is the right time to review its size and
composition.
Today I’m sharing our initial thinking from that review, which we want to discuss with you
between now and this year’s Annual Meeting – at which we plan to seek your endorsement
via a vote.
Top line, we believe the Board priorities for the coming years could be more efficiently
delivered by a smaller Board.
Our current thinking is to reduce the number of directors on the Board from 11 down to 9.
The current balance between Farmer Elected and Appointed Directors would be maintained,
with a composition of 6 Farmer Elected Directors and 3 Appointed Directors. As is the case
today, the Chairman would still be selected from within the pool of Farmer Elected Directors.
Considerations
My personal experience leading or being part of leadership groups is that in smaller groups
people are more engaged and able to share their perspectives in a more meaningful way.
Smaller groups encourage greater sharing of dissenting ideas and opinions – which is a
good thing – and are proven to support faster, robust decision making.
Having now been part of the Co-op’s Board for 5 years, the last 3 as Chair, I’m confident that
reducing the size of our Board will improve the dynamics withing the group, encouraging
greater participation from directors, and maintaining access to the necessary skills and
experience to govern the Co-op into the future.
When thinking about the right size of the Board, that balance is important. We want to
increase efficiency and avoid ‘group think’ whilst retaining an appropriate level of skills and
capabilities, as defined by our board skills matrix.
The New Zealand Institute of Directors recommends, as a general rule, a board size of
between 6-8 directors in the case of medium to large sized companies in New Zealand.
Fonterra’s global scale makes us an outlier.
As well as the size of the organisation, optimal board size is also informed by the associated
workload requirements. The changes in our Governance framework, with changes to our
Board sub-committees and no requirement for an Independent Director to chair the Milk
Price Panel also support the concept of a smaller Board.
Through the previous Governance and Representation reviews it was clear that a strong
Farmer Director majority on the Board was important to farmers, alongside the other
elements of farmer control.
Our view is that the proposed reduction to nine Directors and 6:3 composition will strike the
right balance between a strong and diverse level of perspectives, skills and experiences and

manageable workloads while providing directors the opportunity to participate in discussions
and decisions to the best of their abilities.
The proposed 6:3 split between Farmer Elected and Appointed Directors also protects the
Farmer Elected Director majority principle.
Next steps
The Board is now consulting with the Co-operative Council on this proposal to seek their
feedback, in parallel with seeking feedback from farmers.
We are mindful that it is a busy time on farm and we are all under pressure within our
individual businesses. Rather than create more meetings, we look forward to discussing the
proposal with you during the upcoming September roadshows, which follow the Annual
Results.
In the meantime, if you have any ideas or feedback, please feel welcome to reply to this
email, or speak to your Co-operative Councillor.
Peter