With annual revenues of $2.2 billion, Victorian dairy co-operative Murray Goulburn is one of the biggest mutuals left in Australia.
And like many mutuals, “the pride of Cobram” has struggled when it comes to the basics of corporate governance and commerciality.
Murray Goulburn found itself in a scandal widely covered by the media last year after it was revealed the wife of CEO Stephen O’Rourke was paid a staggering $770,000 for a support role over the two years to June 30, 2010.
These undisclosed payments were all approved by the farmer-dominated board. This became public before the 2010 AGM but after voting had closed.
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Reform hasn’t exactly come with a rush, despite even the national media focusing on the CEO’s spousal generosity with the hard-earned money of farmer shareholders.
While Michelle O’Rourke was smartly sacked from her overpaid support role last November, the CEO himself only departed a few weeks ago after 13 years in the job.
Chairman and Swan Hill farmer Grant Davies at first attempted to defend the situation, telling The Weekly Times the CEO’s wife had a role that involved providing “support from home or wherever is needed by Steve”.
“I would say it is a bit more than a personal assistant … (she does) secretarial, export development, liaising with suppliers bit of industry relations work, (she) has a huge role in supporting Steve.”
Davies only assumed the chair in 2009, when he replaced fellow farmer Ian MacAulay who had served as a director for 18 years, the last 11 as chairman, a lengthy tenure at the top, which coincided with the former CEO’s reign.
The new chairman is bowing out at the November AGM and will be succeeded by accountant Phillip Tracy.
However, both the outgoing and incoming chairman have been involved in several voting and constitutional changes over the past year,0 which appear designed to protect the incumbent directors.
The first was a failed attempt at the 2010 AGM to remove the age limit for directors and impose a requirement that candidates have supplied Murray Goulburn for at least five years before being eligible to run.
However, the age limit change was subsequently approved at an EGM, which has allowed incumbent Ken Jones to contest the current election.
The board will in future comprise nine farmer directors with three elected from each of the three regions — northern Victoria, western Victoria and Gippsland in the east.
There are also meant to be two independents but at the moment only one of these spots is being filled by former ANZ executive and current Westpac and Mirvac director Peter Hawkins. ANZ and Westpac are lenders to Murray Goulburn.
The full slate from each region comes up for election every three years and this year’s election is for northern Victoria, which has attracted these seven candidates for the three positions.
The ballot papers for the eligible 1000 farmers who live in northern Victoria are being sent today and voting closes on October 6. This letter about the field and process was sent on August 22.
The returning officer is Damon Page, an executive of the company, although candidates are entitled to appoint a scrutineer and have been supplied with a copy of the share register.
Last year the Murray Goulburn board used its supplier newsletter, The Devondaler, to criticise challenging candidates at a key time in the election cycle.
It is unclear whether similar tactics will be deployed this year given the extra attention caused by the scandal of the payments to the CEO’s wife.
Murray Goulburn’s volumes have plunged by more than 20% from their peak of more than 4 billion litres of milk a decade ago.
This has partly been due to drought, but there has also been a loss of market share to rivals such as New Zealand giant Fonterra, which bought the old Bonlac business, and the listed Warrnambool Cheese and Butter.
However, despite falling volumes, Murray Goulburn hasn’t rationalised its factory network over the past decade to improve efficiency and therefore provide farmer shareholder/suppliers with better returns.
Incoming CEO Gary Helou starts in three weeks and is expected to take a more commercial approach with some farmers nervous he’ll attempt to repeat his effort at SunRice by trying to sell the co-operative.
However, Helou doesn’t yet know what sort of board he is dealing with because the two incumbents from northern Victoria in the current election, Graham Munzel and Ken Jones, are in serious danger of being voted out for their role in approving the controversial payments to the former CEO’s wife.
*Stephen Mayne is a director of the Australian Shareholders’ Association, which, at the moment, doesn’t provide voting recommendations for shareholders in major mutuals.
* This story originally contained two factual errors. Murray Goulburn’s incoming chairman is Philip Tracy, not John Vardy, and the scandal over the $770,000 in payments to the CEO’s wife became public before the November 24 AGM, not after. Both errors have been corrected.