In 2015 I ran for a position as a Director on the Board of Murray Goulburn Co-operative Co. Ltd.
In the last two weeks I have had many comments – mostly “You dodged a bullet”. But I don’t see it that way. Hindsight is a wonderful thing but I wonder if maybe, just maybe, I would have asked the right questions at the right times.
As an ‘average’ dairyfarmer I know what we need to survive. I didn’t make millions overnight when the Units listed on the Stock Exchange. I don’t have other businesses to ‘prop up the farm’. As I said in my campaign –‘no two farms are the same, but all farmers deserve the same respect and representation. Transparency and accountability are of the utmost importance.’ I do not believe this has been the case of late and now the whole dairy community is suffering.
On May 1, 2015, suppliers were advised that the opening price for FY2015/16 would be $5.60 with an anticipated final price of $6.05. Gary Helou continued with those figures at the Supplier’s Meetings in the second week of September 2015 but reiterating that they were dependant on two factors. The first being that the average valuation of the Australian dollar stay at or below USD$0.76 for the duration of FY2015/16 (even though on May 1, it was at USD$0.79); and secondly that the world price for dairy commodities would begin recovering in late 2015, as was the expectations when the opening price was set.
The dollar rollercoasted, but trended upward from September until it crept over the 74c in March. Whilst it was still under the 76c mark its upward trajectory was concerning.
The world price for commodities had been steadily declining during July and August, and then again in November, and was now lower than it had been on the 1st May when the opening price was announced.
If these two factors were crucial to the continued support for the opening farm-gate Milk Price of $5.60, let alone a closing price of $6.05, then why wasn’t the question asked in November – ‘Is this price truly sustainable?’.
Murray Goulburn’s commitment to its suppliers regarding the integrity of the Board and its Corporate Governance policy is summarised on the website as :-
‘Our governance framework and adherence to that framework are fundamental in demonstrating that the Directors are accountable to shareholders and are appropriately overseeing the management of risk and the future direction of Devondale Murray Goulburn’.
What happened to all the checks and balances associated with this commitment? Who was assessing the risks?
When I ran for the Director’s position I agreed to participate in the inaugural Candidate Assessment Program instigated and conducted by the MG Board. I felt at that time that there was a lot of change needed to the structure of the interview for future assessments. The result of this interview was that I was not endorsed by the Board as a candidate, but I could still run.
The Board was returned with endorsed members who apparently had the skills and experience required by Murray Goulburn to fulfil the above commitment. Where did that get us?
It seems they still didn’t see this price discrepancy coming until mid-April.
Neither did either of the two Special Directors – one of whom has over 40 years of experience in banking and finance, as well as current and previous directorships with major Australian Companies including BHP(NZ), ING, Westpac, Mirvac, Liberty Financial; and was the Managing Director of ANZ(NZ). He is also a Fellow of the AICD, a Senior Fellow with the FSIA, and more…
-the other is also a Fellow with the FSIA, a Fellow of CPA Australia, and has experience in international business and finance with positions at Brambles Ltd, Coca-Cola Amatil Ltd, CSR Ltd, and more…
Others on the Board have degrees in accounting, agriculture, agricultural science and public policy & management. Still others are Nuffield Scholars, members of the Australian Institute of Company Directors and some have held positions on various regional dairy groups.
So again, where did all that experience and good corporate governance get us? Even the ‘average’ farmer could see the opening price was looking unsustainable. We held on to the assurance that the Board and Senior Management were adhering to the governance and risk policies.
Any concerns from suppliers were dispelled at the March supplier’s meetings when the end of year FMP was reduced to the opening price of $5.60. Not the $6.05 that we hoped for, but supposedly sustainable for the rest of the financial year. So what went wrong? We have heard nothing from Gary Helou or Brad Hingle and the Board continue to suggest that even with hindsight they would make the same decisions.
We are now faced with the situation whereby we have four vacant Board positions. We need to find a new Managing Director and Chief Financial Officer. Our price has been slashed to an unsustainable level and there is anger and resentment amongst our suppliers. Not a good place to be when looking towards the future.
But wait…..there’s more.
There is a belief amongst our Board members, and others within the fraternity, that we should decrease our ‘farmer representative’ Supplier Director numbers from 9 to 6 - effectively reducing the overall Board member numbers from 12 to 9.
I disagree.
By comparison, of Australia’s top ten Companies, seven of them have Boards made up of 10 members or more.
Murray Goulburn is a Co-Operative owned by farmers and as such must adhere to their statement – ‘The Board's principal objective is to create and enhance shareholder value in a manner which is consistent with the co-operative objective of maximising supplier returns’. I don’t believe that reducing the number of Supplier Directors is in keeping with this principle.
I do believe that this objective (maximising supplier returns) was sidestepped in the last 12 months whilst trying to realize the forecast dividends advertised in the Supplementary Prospectus (29 May, 2015) at a range of 15.5 to 18.1 cents per Share/Unit. A very ambitious goal.
However suppliers/investors were forewarned that things could go wrong in sections 1.3 and 1.4 of the Prospectus (1 May, 2015). Of the possible 24 risks noted in the Prospectus as having adverse reactions to MG investors, at least 14 of those risks have now occurred. It seems that MG got that right!
It is not unreasonable to suggest that Murray Goulburn continue with the 12 member Board that has served the Co-Op successfully up until now (we must remember that MG has been, and it seems, still is the price-setter). Before voting, ask your candidates whether or not they support a reduction in the Supplier Member numbers represented at the Boardroom table.
Just how the make-up of the Board unfolds is in the hands of the suppliers. Little comfort, I know, but empowering none-the-less.
