With turnover of around $20 billion year, dairy co-operative Fonterra is far and away our largest enterprise. And Henry van der Heyden, now Sir Henry, has been its governance helmsman since 2002.
This year, coincidentally his final as chairman of Fonterra, his leadership was tested. He faced two events that will significantly define the evolution of Fonterra. The first was the introduction and general acceptance by farmers of the controversial Trading Among Farmers (TAF) scheme designed to facilitate Fonterra’s future capital raising needs. The second was his leadership of the recruitment and eventual appointment of new chief executive.
Van der Heyden was QBE Chairperson of the Year Award finalist in 2007 and 2010. He won the award this year because of his 10-year contribution which culminated in his leadership and resolution of these two critically important governance issues.
Fonterra’s size and complex structure make it difficult enterprise to govern. The company and its performance has its critics, both internal and external, because of its size, management of environmental issues, branding strategies and even its board composition and management structure. These, and host of other issues, reflect the nature of the beast.
But Fonterra is vital part of the New Zealand economy. “What needs to be recognised is that Sir Henry has done the hard yards and not walked away from the challenges the company has faced over the years,” the judges said. “The success of Fonterra has been, and will continue to be, critical to New Zealand and in the past 12 months in particular, Sir Henry has led the board to secure that ongoing success.”
Sir Henry personally led and fronted the campaign to convince farmers to adopt the TAF programme. Fonterra’s 10,500 farmer shareholders have historically resisted moves to create new capital structure, even one that will facilitate raising capital to redeem farmer shares without impacting Fonterra’s cashflow or eroding remaining farmers’ equity.
Against the odds, the board delivered solution to hotly debated corporate problem and Fonterra will issue $500 million investment units that will give non-farm investors access to the cooperative’s dividend cashflow.
Fonterra traditionally had to buy farmers’ shares when they left the industry. That presented cash demand problems. The TAF scheme is globally unique which, Sir Henry admitted recently, made it difficult to sell the concept to farmers “because they had nothing to compare it with”. But he is convinced the company has “modelled it to death” and that it will answer both the farmers’ concerns and the company’s capital needs.
And while this campaigning was going on, Sir Henry had to meet the challenges associated with selecting and settling in new chief executive. The choice and appointment of new CEO is, after all, critical governance assignment. Theo Spierings, former head of The Netherlands’ Fonterra equivalent – Royal FrieslandCampina – seems from early indications to be sound choice.
Fonterra accounts for 30 percent of the world’s dairy exports which represent 95 percent of the country’s milk production. Spierings calls this “unique situation” and Fonterra “unique co-op”.
The TAF scheme is the Fonterra board’s answer to striking balance between dealing with redemption risk, maintaining 100 percent farmer ownership and offering external investors an opportunity to invest in New Zealand’s perceived lucrative dairy industry. “And it was critical that the Fonterra board get it over the line,” said the judges. “Sir Henry’s role in accomplishing that was pivotal.”
Sir Henry is also chair of Tainui Group Holdings and director of Auckland International Airport, Independent Egg Producers and several other enterprises. He will step down as Fonterra’s chair after the company’s annual general meeting in December this year but remain as farmer-elected director “for up to six months”.
“Sir Henry met the challenges of huge work load and led the board very effectively over the past year,” said the judges. As one newspaper reported recently, “dairy farmer politics are rugged and ruthless”. Sir Henry has been up to the task of dealing with that this year and for 10 years prior. M
CHAIRPERSON OF THE YEAR JUDGES’ COMMENTS
SIR HENRY VAN DER HEYDEN
Henry van der Heyden, now Sir Henry, has been chair of New Zealand’s largest corporate and global dairy enterprise Fonterra since 2002. He is also chair of Tainui Group Holdings and director of Auckland International Airport among other businesses and organisations. He has twice been finalist in this award category.
His leadership of the Fonterra board has been particularly outstanding this year. He fronted the delivery of the Trading Among Farmers scheme that will be critical to Fonterra’s equity-raising capability in future. He led this extremely difficult process helping to successfully deliver positive outcome. He also successfully completed one of the most important of all governance tasks, the selection of new chief executive. Fonterra is large and highly complex enterprise and, because of its size and contribution to the economy, its fortunes are vital to New Zealand. Sir Henry this year has demonstrated his very effective board leadership skills.
DR DAVID KERR
David Kerr is general medical practitioner who has successfully transitioned to business leadership. As chair of Ryman Healthcare since 1994 he has led the board strategy that has built one of New Zealand’s most successful enterprises. He is an advocate of best practice management and governance. His commitment to, and deep understanding of, health-related issues makes him an invaluable contributor to various sector boards and organisations. He is, for example, director of Pharmac, the Government’s pharmaceuticals purchasing agency.
Kerr’s unique combination of specialist sector knowledge and organisational leadership skills make him and an obvious choice as finalist in this important Top 200 Award category. He has been, and still is, an outstandingly successful chair of Ryman and of other organisations in the health sector.
As the chair of Auckland International Airport and Mighty River Power, Joan Withers’ board leadership skills have been tested this year and found to be up to the highest standard. She is increasingly seen as one of New Zealand’s most outstanding governance leaders. She is both astute and professional in the way in which she both directs success and handles difficulties. She has been an effective leader of the charge to bring greater diversity to the board tables of New Zealand’s listed companies.
Withers’ apprenticeship as successful executive gives her deep understanding of how to manage successful businesses. She has turned that experience to count at the board table. She is an outstanding chair who has earned her stripes with two companies that have undergone significant strategic change, board renewal and high-profile activities.