Fonterra’s Ownership Structure and Governance Models
This report discusses corporate governance and leadership through case studies. Three New Zealand companies were selected as examples of case studies, namely Fonterra, Synlait Milk, and Ngai Tahu Holdings Limited. Founded in October 2001, Fonterra is now among the world’s largest dairy exporters and processors, providing high-quality dairy products (Fonterra, 2019). Synlait Milk is one of New Zealand’s five largest independent milk processors, mainly engaged in the production and processing of milk powder (Synlait, 2019). NgaiTahu Holdings Limited is an investment company with a focus on seafood, tourism, capital, farming and property. These three companies have completely different ownership structures, and Ngai Tahu Holdings Limited’s owner is Maori (NgaiTahu, 2019). This report analyzes them from the following aspects. The first is the ownership structure, followed by governance and leadership models, the boards’ legal and social responsibilities to legislation and compliance, Treaty of Waitangi, ethical lessons/corporate social responsibility, ecological sustainability, and financial sustainability. Finally, this report makes corresponding recommendations.
The ownership structure of Fonterra is based on a cooperative model in which its shareholders are fragmented. Carroll & Buchholtz (2012) provided that there are a large number of shareholders in the company that only holds a few number of shares which resulted in distributing the voting powers in the company. Mostly, public depositors that invest in the company are focused on acquiring its financial rights which are based on the financial performance of the company and they find it easier to acquire these rights since the company is partly listed on NZX (Wilson, 2017). A key part of the ownership structure of the company is that around 10,500 New Zealand dairy farmers own the shareholders of the company; however, the shareholding ratio of each member is less than one percent (Farrar, 2001). Since most members of the company are farmers, they enjoy 100 percent holding of the company. Due to this membership structure, if a person wants to purchase milk from the company, then the transaction can only be completed after negotiation with the corporation rather than the farmers themselves (Wilson, 2017). Barry, Lepitit & Tarazi (2011) provided that due to this structure, the negotiating power of purchaser is decreased which enables the company to enjoy control over the pricing strategy and supply of its products. Moreover, this structure protects the interest of individual farmers since they are able to establish a perfect quality traceability mechanism (Painter, 2010). However, this structure has made it challenging for Fonterra to find suitable and innovation structure by generating external capital since its operations are limited to its shareholders and it cannot rely on external sources of funding (Hanson, Dowling, Hitt, Ireland & Hoskisson, 2014).
Synlait Milk’s Ownership Structure and Governance Models
However, ownership structure of Synlait Milk’s different that of Fonterra, which sole proprietorship is. The ownership of the company is mainly divided into Synlait Milk’s top three shareholders which include Bright Dairy, A2 Milk Company and Mitsui & Co. Ltd., with the share percentage of 39.04%, 9.11%, and 8.38%, respectively (Synlait,2019). The ownership of Bright Dairy in the company is unique because the company became the owner of Synlait Milk on October 26, 2010 with a 51% stake in Synlait Milk Limited (Synlait, 2019). Bright Dairy had made payment of eighty two million dollars for having the fifty one per cent stakes in the marketing and processing assets of private Canterbury processor that means top three biggest dairy entities of the nation will be majorly and expressively foreign owned (Ugwu, Onyishi & Rodríguezsánchez, 2014). The ownership structure of Synlait is different from the cooperative model of Fonterra that shows the interests of various shareholders whereas Bright Dairy is the only shareholder which has a major interest in Synlait.
In order to protect the ownership interest of farmers, the government of New Zealand has provided that the stakes in the company which is acquired by Bright Dairy did not include the farmland assets (Pooch, 2008). Synlait takes approximately twenty per cent of the milk from Fonterra, the regulatory requirement of Dairy Industry Restructuring Act, and new ranchers had already come up to this entity that must decrease the dependence on Fonterra milk to approximately ten per cent while the new drier was constructed. In fact, the New Zealand government is more supportive of overseas investments that do not harm their basic interests. Although, the acquisition is only the factory, the farm is 100% owned by the previous shareholder of Synlait Milk (Lee, 2004), so the milk source of the farm will still be 100% supplied to SynlaitMilk which defines the ownership structure of the company.
Ngai Tahu yearly gives contribution in excess of two hundred million dollars to an economy of South Island (NgaiTahu, 2019). Ngai Tahu has involved in present day trading activities since year 1950, while the Ngai Tahu Maori Trust Board had per annum income of approximately twenty thousand dollar to put to asset and distribution by the iwi (NgaiTahu, 2019). Ngai Tahu used the earning to invest again and raise the base of assets. From the starting, the financial policy of Ngai Tahu included reinvesting unevenly two third of earning and upholding the firmly made focus on distribution policy to render help to tribal members with the help ofscholarship and educational grant (Painter, 2010). Ownership structure of NgaiTahu Holdings Limited is unlike the above two companies, and it is controlled and operated by the NgaiTahu Charitable Trust. According to the characteristics of the trust, NgaiTahu Charitable Trust can invest in both the capital market and the industrial sector, while Synlait Milk and Fonterra may face difficulties in doing the same thing because of industry restrictions (Ugwu, Onyishi & Rodríguezsánchez, 2014). In order to maximize the return of investors, NgaiTahu Holdings Limited achieves the diversification of investment fields so that it can, to a certain extent, effectively reduce investment risks (NgaiTahu, 2019). However, some rules of trust may block the way out of the beneficiary dispute (Cant, 2010). When the beneficiaries have an equity dispute, Synlait Milk and Fonterra can solve it through transfer of equity (Ugwu, Onyishi&Rodríguezsánchez, 2014), but for NgaiTahu Holdings Limited, the regulations of trust often prohibit the transfer of equity, blocking the solution of the dispute (Ngo, 2004).
Ngai Tahu Holdings Limited’s Ownership Structure and Governance Models
Fonterra defines corporate governance as operation between shareholders, directors and management of the company, as set out in the constitution, formal policies of the company and the general law, takes pride of place, organizationally speaking (Fonterra, 2019). Fonterra is devoted to the high norms of leadership and corporate governance; however, the company has faced many issues due to its failure to comply with corporate governance principles. For example, the company pleads guilty over food safety violations in 2014 which led to recalls of milk products in China (BBC, 2014). Dairy products which were processed and exported by the company to China did not meet food safety standards and the company admitted that products include bacteria that cause food poisoning which led to a civil court action (BBC, 2014).
Fonterra’s governance and leadership model is the UK/Commonwealth Principles Based model because the company law of New Zealand is based on common law (Tricker, 2015). The code of corporate governance principles are based on good practices which determine board responsibility rather than the rule of law. These principles are self-regulatory and compliance is voluntary which focuses on independence of directors and committee and maintaining high level of transparency and accountability in the company. For example, Fonterra currently has 13 directors, 9 of whom are elected by dairy farmers and 4 by existing directors and approved by dairy farmers and these directors are indenpent based on the NZX criteria and they voluntarily decides to comply with code of ethics to maintain transparency in the operation (Fonterra, 2019). According to the regulations of the Fonterra Group, the appointment or resignation of all personnel of the board of directors is decided by the dairy farmers’ share by postal ballot (Investor Centre, 2019). The shareholder committee has the right to participate in day-to-day business management matters, such as negotiating with the board of directors on important operational decisions like dairy product sales pricing (Grant, Butler, Orr&Murray, 2014). In such the governance and leadership model, Fonterra Group’s shareholding structure and the characteristics of its group decision-making process decide the position of no real regulator. Consequently, the cost of applying governance rights is very high. So, the only factor of meeting of shareholders of company cannot be effective for perpetual set up of the company (Grant, Butler, Orr & Murray, 2014).
Synlait Milk’s governance and leadership model is also the UK/Commonwealth model, but the way of management is totally different from Fonterra. Synlait Milk’s Board has eight members, including one member appointed by the board, three independent directors such as the Chairman and four members appointed by Bright Dairy. The best practice example by Fonterra is the co-op plan established by the company for meaningful recognition and rewards for farmers that engage in high quality, safe and sustainable dairy (Farmnewz, 2018). As per Robert Spurway, CEO of Fonterra, the company recognizes those farmers that focus on milk quality, animal welfare and environmental best practice and it supports those farmers that need improvements to encourage them to engage in ethical business practices while focusing on the interest of key stakeholders (Farmnewz, 2018).
Comparison of Governance and Leadership Models
In the case, where is a major adverse company event, Bright Dairy will correct it by exercising voting rights on the board of directors (Healy, 2003). The relatively concentrated power of Synlait Milk helps it to promote the convergence of the company’s senior management and shareholders, especially the controlling shareholder, and the agency costs are thus controlled. However, the high concentration of power will lead to the excessive participation of the controlling shareholder in the company, which will lead to more serious interest encroachment (The Times 100 Business Cases, 2011). Consequently, Bright Dairy has 51% shares in Synlait milk ltd. It has highly concentrated power. It can influence the independence of the independent directors, administrators and mediators (Tricker, 2015).
Unlike the two companies above, NgaiTahu Holdings Limited governance and leadership model is similar to the continental European two-tier model. In this model, the company law is rule based and the finance markets tend to be smaller and less liquid. Market corporate control is weak and the effectiveness of supervisory board is questioned due to lack of real power. Therefore, Ngai Tahu Holdings Limited aims to motivate the females to join committee and company’s board to increase effectiveness of the board’s powers (McBeth, 2018). It renders the governance advices, devices and data taken from the proficiency of Women’s Affairs Ministry and skilled female directors. As per the overview of company’s board, it is believed that diverse board will be best board. The company tries to make sure the pool of probable directors states the make-up of communities (Ng?iTahu, 2019).
Legislation and compliance
In 2001, New Zealand enacted the Dairy Industry Adjustment Act2001, one purpose of which was to provide a credit union of a wholly-owned subsidiary of the New Zealand Dairy Board to convert it into a company. Fonterra was formed under the influence of this law. The Dairy Industry Adjustment Act 2001 assists and governs shareholders (farmers) of the company (Carroll & Buchholtz, 2012).In addition, Fonterra is required to comply with the Consumer Protection Act 1993, the Fair Trade Act 1986, the Resource Conservation Act 1991, the Commercial Law 1986, and the Animal Products Act 1999 (Cao, Maurer, Scrimgeour &Dake, 2003).The Dairy Industry Restructuring Act 2001 permitted the Fonterra group’s formation. The Dairy Industry Restructuring Act 2001 has regulations to motivate the well-organized functions of dairy marketplaces in New Zealand by administrating and governing the Fonterra’s activity to make sure dairy goods and services marketplaces are contestable (Grant, et. al, 2014). The committee recommended that they and the Financial Markets Authority (FMA) be the best candidates for the mandatory Fonterra implementation of the Inter-Doam Exchange Program (TAF) in the Act (Financial Markets Authority, 2014). Fonterra has conceded that there are “management problems with its Chinese joint venture partner, Salu that is involved in the danger milk powder disgrace.This shows that Fonterra violated the Fair Trade Act 1986. The Fair Trade Act 1986 promotes the dairy goods safety and consumer protection (Farrar, 2001).
Legal and Social Responsibilities
Synlait Milk stated that in the harvest of raw milk, dairy farmers, dairy farm managers and operators operate under Risk Management Programs. In addition, Synlait Milk strives to meet some general requirements such as Good Operating Practice, Hazard Analysis Critical Control Point and more. From Synlait Milk’s announcement and media reports, there were no quality problems with Synlait Milk and no violations of FMA principles or other laws, indicating that it is performing well and has been complying with relevant laws and regulations (Financial Markets Authority, 2014).The waiver from rule 3.3.8 (a) given in para 15 is subject to governance condition. To grant the waiver, NZXR considered that complete and correct disclosure of Governance Arrangements of Synlait Milk and impact of waiver provided should be stated in offer document to aware the shareholders about non-standard government. NZXR also considered that disclosure of governance arrangement’s material aspects should be given in annual report. These governance arrangements should be adopted by the shareholders by accepting the constitution before to IPO. Beside this, the Companies Act 1993 governs the board of the company(Healy, 2003).
As a listed company, NgaiTahu Holdings Limited, like Fonterra and Synlait Milk, must comply with the Company Act 1993, FMA principles, and so on. At the same time, NgaiTahu Farming is also subject to the Animal Products Act 1999. However, as a Maori company, NgaiTahu Holdings Limited must also comply with the TeRunanga o NgaiTahu Act 1996, while Fonterra and Synlait Milk are not subject to this law (NgaiTahu, 2019). By reviewing the FMA website announcements and online news, no report are found that NgaiTahu Holdings Limited was illegal (Cant, 2010).Moreover, the section 42 of Maori Trust Boards Act 1955 states that it shall be the responsibility of each adult person who is a member of Ngai TahuWhanui to ensure that his or her name is included in the roll. Te Runanga o Ngai Tahu Act 1996 binds the executives and every individual including board and company, whose right are influenced by the provisions of TeRunanga o Ngai Tahu Act 1996. Te Runanga has a responsibility to ensure the statutory relationship. NgaiTahu Holdings Limited welcomes new health and security legislation.Hence, the company fulfils the responsibilities in complying with the laws (Governance New Zealand).
Code of ethics of company
Fonterra is devoted to high standard of management and corporate governance of the company due to which it works with farmers that comply with high standards and reward them for their operations (Farmnews, 2018). However, the company was pleaded guilty in its failure to maintain high quality standards while processing and exporting goods to China (BBC, 2014). It shows that the company has failed to comply with its code of ethics; therefore, the company is required to get the faith of workers of the company, shareholders including farmers and customers. It is possible only in case of right doings on daily basis (McBeth, 2018).
Ethical Lessons and Corporate Social Responsibility
The code of conduct of Synlait Milk provides that it focuses on maintaining ethical standards and professional standards, which are required to expect by the employees of the company at workplace (Miceli, Near & Dworkin, 2013). The company’s code of ethical principles is focused on helping workers to understand the procedure of carrying out the obligations in ethical manner while protecting the interest of employees. However, the company shut down its operations in Sri Lanka leaving 755 employees without work which should contradictions with its code of ethics (edairynews, 2013).
Furthermore, the Code of ethics of NgaiTahu renders the guidance on the norms of behavior or conduct which ensures the credibility and accountability of TeR?nanga within Ng?iTahu Wh?nui. The company is devoted to maintain the high degree of personal integrity and moral conduct in all the activities (Hanson, et. al, 2014). Currently, no lawsuits have been filed against NgaiTahu that challenges its code of ethics.
Treaty of Waitangi
Fonterra complies with the Treaty of Waitangi (Jacobs, 2000). In 2017, Fonterra announced the appointment of TiakiHunia as general manager of Maori Strategy. As Pouhere Maori, Tiaki will play an important role in continuing to advance Fonterra’s Maori strategic commitment and strengthen Fonterra’s dual cultural capabilities (Hill, 2010; Stqokes, 1992). He will be responsible for the entire enterprise, thus leading, establishing and implementing Fonterra’s vision of building strong partnerships with Maori to jointly develop a sustainable, healthy and prosperous community (S. Linck, Netter, &TinaYang. 2008). Fonterra provides an extensive network, valuable experience and expertise for the entire Maori and major Maori industries, which means that Fonterra takes social responsibility regarding the Treaty of Waitangi.The treaty principles defines the partnership, participation and protection. The principles states the work together with iwi, whanu, hapu and Maori groups to make sure Maori person and their powers are secured and admired.The participation involves the Maori communities in design, administration, governance and application and assessment of the research including Maori people.Further, the protection includes security of board, Maori communities and their rights. The boardensures the compliance with laws by the treaty of Waitangi.
However, Synlait Milk’s annual reports and announcements did not cover content related to M?ori, but through searching for news by Google, there was information about Synlait Milk’s cooperation with the Maori factory Miraka Ltd (Stuff, 2010). This is a Maori-owned company and it had built milk processing lines for Synlait Milk at Dunsandel in the South Island. This shows that Synlait Milk does not have a special strategy related to the Treaty of Waitangi, but it does not exclude Maori as a partner.However, Synlait Milk makes focus on becoming the supplier of choice to certain leading milkbased health and sustenance corporations.Therefore, it can be seen that Fonterra is doing better than Synlait Milk in terms of taking social responsibility regarding the Treaty of Waitangi.
Ecological Sustainability
NgaiTahu Holdings Limited, as a Maori company, is itself protected by the Treaty of Waitangi (Spiller, Pio, Erakovic&Henare, 2011).Now, NgaiTahu Holdings Limited takes socially responsible for NgaiTahu. Foran example, its subsidiaries NgaiTahu Seafood, NgaiTahu Tourism, NgaiTahu Capital, NgaiTahu Farming and NgaiTahu Property were established for the benefit of Maori (Katene, 2010). As the largest Maori listed company in New Zealand, NgaiTahu has made an important contribution to the maintenance and guarantee of the interests of NgaiTahu under the Treaty of Waitangi (Wyeth, Derrett, Hokowhitu, Hall, &Langley, 2010). Both Green Party as well as Maori party criticize the Treaty settlement by stating that the executives have so much powers in the negotiation that settlements conveyed at Kiwi stage avoid hapu’s powers and that settlement reimbursement is too ungenerous. In this way, Ngai Tahu Holdings Limited is very responsible to fulfill the legal and social responsibility in respect of the Treaty of Waitangi.
Corporate social responsibility
Fonterra has always adhered to the corporate social responsibility and actively committed to the public welfare. Fonterra was named one of New Zealand third worst dumpers. For an example, It is the five million dollars a year job, which no one desires.For example, “Fonterra Scholarship” attracts more young people to join the animal husbandry and food industry through the cooperation with key agricultural institutions, thus helping personnel training and reserves in the food industry (Siegel&Vitaliano, 2007). The corporate social responsibility activities of Fonterra are not only the project to assist the group or with objective to enhance volume of sale. However, the corporate social responsibility improves the image of company also. For an example, Fonterra has various corporate social responsibility activities to aid social like “Fonterra Milk for learning centers” movement (Pavlovich, Sinha & Rodrigues, 2016). When Fonterra’s milk tanker collects and transports milk, it begins preliminary safety and quality testing of the milk, and they will also be tested by a third-party testing agency, the New Zealand Raw Milk Testing Laboratory (Goldberg&Porraz, 2002). However, there is some negative news about Fonterra’s corporate social responsibility. For example, at a press conference held on August 3, 2013, Fonterra Group introduced three batches of concentrated whey protein with quality problems. The source of the pollution was a contaminated pipeline at the regional plant in North Island. This case shows that Fonterra needs to improve its product quality management.Synlait Milk does better than Fonterra in terms of corporate social responsibility.
Synlait Milk actively explores and establishes a food quality and safety guarantee system that suits its own characteristics from the actual situation. Nowadays, with the further improvement of consumers’ food safety awareness, the food industry is constantly improving the work of food safety management (Lockett, Moon&Visser, 2010). In such situation, Synlait Milk makes efforts to establish a stable and high-quality raw material supply base and provide nutritious, healthy and safe quality products through innovative production (Mcwilliams&Siegel, 2001), thus enhancing competitiveness and guaranteeing food safety. There is no negative news about corporate social responsibility caused by Synlait Milk, so it can believe that the company does a good job in social responsibility. Synlait Milk takes responsibilities for the businesses, good governance, proper board structure and state welfare and health of animal, social responsibilities and good quality milk.
Financial Sustainability
Different from Fonterra and Synlait Milk, Ng?iTahu Holdings Limited’s corporate social responsibility is mainly for the Ng?iTahu community rather than the whole society. The purpose of all Ng?iTahu Holdings Limited’s commercial operations is to increase the Maori asset base and income, thereby providing more support to whanau and community with charitable purposes (Jamali &Mirshak, 2007). NgaiTahu Holdings Limited values its charitable trust status and assesses annually all expenditures and operations ensure they meet the legal “charity (Mcwilliams & Siegel, 2001).” The BOD of company is liable for and supervises governance and administration of corporate social responsibility. CSR’s stakeholders support the director’s appointment and keep them liable for company’s performance. NgaiTahu Holdings Limited has an annual distribution plan including cultural projects, marae projects, environmental projects, language revival, extracurricular tuition, higher education and scholarships, thus promoting the welfare of NgaiTahuWh?nui. Similar toSynlait Milk, there is also no negative news about NgaiTahu Holdings Limited’s corporate social responsibility, indicating that the two companies do better than Fonterra.
4.5 Ecological sustainability
The New Zealand law defines the environmental responsibilities. Section 17 of the Resource Management Act 1991 describes that everyone has responsibility to ignore, cure or diminish the negative effects on environment rising from the activities continued by or on behalf of those people(Andersson, Shivarajan&Blau, 2005). In addition, Fonterra also promotes the exchange and cooperation between the dairy farming industry and the dairy processing industry through various forms such as forums, training and scientific research to support the long-term ecological sustainable development of the dairy industry (Lindgreen&Swaen, 2010). The implementation of the most stringent food safety standards in New Zealand and the world ensures the safety of every product of Fonterra. However, Fonterra has been fined because it polluted the Rangitaiki River and other smaller waterways by its Edgecumbe plant (TVNZ, 2019). This case indicates that Fonterra is not as good in terms of ecological sustainability as it claims, so this has a negative impact on Fonterra’s reputation.
Synlait Milk has committed to decrease the environmental impacts meaningfully over the upcoming period by ensuring the good corporate governance, best board structure and aiming main areas of the value chain. Synlait Milk does a better job than Fonterra in terms of ecological sustainability, Synlait Milk explores the green economy. It adopts a variety of effective energy-saving measures, such as the promotion of energy-saving new light source electrode less lamps, the application of air compressor and water pump flow frequency conversion control technology, the promotion of energy-saving screw units, etc. Each factory has a sewage treatment station and the equipment there are operating normally (Callicott&Mumford, 2010). The sewage treatment capacity is matched with the plant design capacity, and the sewage treatment meets the standard discharge (Svoray, Perevolotsky& Atkinson, 2013). There is no news about the ecological problem caused by Synlait Milk, so it can believe that the company is willing to take responsibility for environmental protection and contribute to the implementation of sustainable development.
Recommendations
Like Synlait Milk, Ng?iTahu Holdings Limited also attaches great importance to ecological sustainability. For example, in 2018, NgaiTahu Holdings Limited launched the Whaka-Ora Healthy Ports Program for the port of Whakaraup?/Lyttelton (Shrivastava, 1995). The dream of company is that our familial land is secured and the team have living relations with the whakapapa and tradition by the environment. The plan stipulates how the entire port will be managed over the next 20 years – kiutaki tai – improve Mahinga kai value as well as the ecological and cultural health of the port (Ng?iTahu, 2019). The program is deeply rooted in the values of Ng?iTahu Holdings Limited and strives to meet the wishes of NgatiWike and the wider community
Financial sustainability
NZ GAAP was established by permission of financial reporting standards and commanding direction by the former New Zealand ASRB, a self-governing crown entity. Moreover, IFRS are developed for implementation by profit-oriented companies.Fonterra announced its fiscal year results that the total income of dairy farmers’ shareholders has improved significantly. The company confirmed that in the 2016/2017 milking season, 100% of the farmers holding the final cash income of the company was 6.52 New Zealand dollars. However, the net loss for the year ended July 31, 2018 was 196 million, and the share price also fell (Fonterra, 2018). This prompted Fonterra’s board of directors and management to begin to fully reflect on the development strategy in the market. Fonterra will reassess all investments, major assets and partnerships to ensure they still meet the needs of the cooperative today.Financial sustainability of Fonterra is weaker than that of Synlait Milk. As of January 20, 2018, financial data for the first half of 2018 showed that Synlait Milk’s net profit after tax (NPAT) was a record high of a$40.7 million, an increase of 284% year-on-year. As of the end of January, the company’s net debt achieved a sharp drop so the balance sheet was greatly improved, and share prices are also on the rise (Synlait, 2018). This is due to the extensive experience of effective management of Bright Dairy’s board of directors and management in the dairy industry. Synlait’s accurate market positioning has won extremely favorable conditions for the future development of Synlait Milk, consolidating its position in the industry and gaining more business opportunities (Drew &Dollery, 2014). In addition, due to the good company’s current cash flow and asset-liability performance, Synlait Milk has less pressure to raise funds for future expansion.
Similar to Synlait Milk, due to the diversified investment strategy adopted by the board of directors and management, Ng?iTahu Holdings Limited is in rapid development and the stock price is also on the rise, which is similar to the development of Synlait.For example, in 2018, Ng?iTahu Holdings Limited’s total return on equity (inc NTFSL) was 14.9% in 5 year average; total net profit was $149.92 m; distribution to TeR?nanga o NgaiTahu was $61.05 m; operating return on equity (inc NTFSL) was 3.20%; Net operating surplus was $47.75 m (NgaiTahu, 2018). However, NgaiTahu Holdings Limited faces challenges as economic growth prospects slow, asset prices rise and business confidence declines (Sridhar, 2011). Throughout the group, the future will be driven by ensuring that it focuses on existing portfolio with an excellent operation to get the best cash return.
The boards’ legal and social responsibilities
Despite Fonterra’s efforts in corporate social responsibility, the milk source pollution incident has a negative impact on its reputation. Therefore, in the procurement of raw materials, Fonterra should strengthen the construction of the milk source base, such as using the corresponding professional and technical personnel to achieve routine testing of the raw milk purchased by the station according to the national standards for dairy quality and safety, so that the milk source is within the control of the enterprise itself. Synlait Milk’s adherence to social responsibility will enable the company to gain the trust of more consumers. It is required by Synlait Milk to make rational use of capital operation to control all quality links from farm to table so that consumers can drink real high-quality milk (Sen& Bhattacharya, 2001). Ng?iTahu Holdings Limited has always worked hard for the interests of Ng?iTahu. Although, it has severalcompanies with a focus on seafood, tourism, capital, farming and property, in order to take more social responsibilities for Ng?iTahu, in the future, Ng?iTahu Holdings Limited is required to expand business. The company is required to continue to develop more industries such as clothing industry and catering industry.
Governance and leadership models
In the process of organizational development, Fonterra must train the leadership and management personnel of the Boardsuch as BOD to further improve the service quality and work efficiency of cooperatives (Erlicher&Massone, 2010). In case of failure of board, the directors are responsible. A highly concentrated shareholding structure will result in a decrease in the liquidity of Synlait Milk’s shares. Therefore, it should establish a sound independent director system to protect the interests of shareholders from infringement (Armstrong, Core&Guay, 2014). The good director system works in best interest of shareholders as well as company itself. For NgaiTahu, when making decision for investments, the founders should thoroughly analyze the long-term impact of the trust on the company, and promote the trust to play a positive role in good corporate governance mechanism and proper board structure (Institute of Directors, 2015).
Ownership Structure
The proper ownership structure ensures the good corporate governance in company. Fonterra should strengthen the publicity of the property rights of different farmers in the way of issuing leaflet to each farmer so that more farmers can understand their rights. In this way, farmers can protect them through legal approach when their interest is harmed by the company (Lemmon&Lins, 2003). Synlait has a large number of small and medium investors, in order to protect their basic interests, Synlait needs to disclose information in the form of news released on its website in a combination of regular and non-scheduled manner, including financial accounting information, governance structure status, business status, ownership status, etc., thus helping small and medium shareholders and other market investors to make accurate judgments. Although trusts are being used more widely, trusts are not the perfect equity setting tool for beneficiaries. The setting of NgaiTahu Holdings Limited’s equity must be considered whether it helps resolve disputes and promote or restore beneficiary harmony (Institute of Directors, 2015).
Conclusion
This report discusses corporate governance and leadership throughthree New Zealand companies as examples of case studies, namely Fonterra, Synlait, and Ngai TahuHoldings Limited. For the ownership structure, Fonterra adopts the cooperative model; Synlait Milk has the sole owner, while Ng?iTahu Holdings Limited is controlled and operated by Ng?iTahu Charitable Trust. In terms of governance and leadership models, both Fonterra andSynlait Milk use the UK/Commonwealth model, while Ng?iTahu Holdings Limited uses the continental European two-tier model. In terms of legal and social responsibilities, Ng?iTahu Holdings Limited and Synlait Milk comply with the law and continue to work hard for sustainable development, but Fonterra does not do well enough. Therefore, Fonterra needs to strengthen the monitoring of breeding, milking, and acquisition to ensure that the milk source is safe and reliable
References
Andersson, L., Shivarajan, S.&Blau, G. (2005). Enacting Ecological Sustainability in the MNC: A Test of an Adapted Value-Belief-Norm Framework. Journal of Business Ethics, 59(3), 295-305.
Armstrong, C. S., Core, J. E. &Guay, W. R. (2014). Do independent directors cause improvements in firm transparency? Journal of Financial Economics, 113(3), 383-403.
Barry, T. A., Lepetit, L.&Tarazi, A. (2011). Ownership structure and risk in publicly held and privately owned banks. Journal of Banking & Finance, 35(5), 1327-1340.
BBC. (2014). New Zealand’s Fonterra in guilty plea over food safety violations. Retrieved from https://www.bbc.com/news/business-26556261
Callicott, J. B.& Mumford, K. (2010). Ecological Sustainability as a Conservation Concept. Conservation Biology, 11(1), 32-40.
Cant, G. (2010). Memory Recovered and a Basket of Remedies Negotiated.-16: A P?keh? Perspective on the Settlement of the Ng?iTahuLand Claim. New Zealand Journal of Geography, 105(1), 8-16.
Cao, K., Maurer, O., Scrimgeour, F. G. &Dake, C. K. G. (2003). Estimating The Cost Of Food Safety Regulations To The New Zealand Seafood Industry. Paper presented at the Conference (47th), Fremantle, Australia 57840.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
