So who would be a Fonterra manager this week?
After our biggest commercial enterprise posted its second bad set of books this week the dairy giant has been our biggest punching bag.
And for good reason.
Here's a company with an asset value of $800 million odd expecting a $600 million dollar odd loss. That's magnificently bad.
A foundation stone of our economy, its successes and failures affect us all but they maintain an impressive radio silence. They don't talk to the media. They don't talk to the government. Even the people Fonterra depend on, the farmers, complain about the lack of communication. Remember farmers own the company. It's still a co-op.
Structure is a bit of thing for these guys. The brought in a share mechanism to bring more capital into the business and then concentrated on that instead of the base of the company which is farmers producing milk.
They made bad calls but instead of learning from them doubled down sucking the company further down like a winter grazing cow in Southland up to its belly in mud.
And if all that wasn't bad enough for the farmers, the people responsible for the quagmire wear nice suits, fancy shirts, drive nice cars have great holidays but they never get wet or wear red bands. They're paid way more than any farmer could ever imagine. This is firing on the lynch mobs.
Now I'm not an automatic critic of executive pay. When Adrian Orr was at the super fund there was a ruckus about his pay but I thought he was worth every cent. But it seems obvious that Fonterra management has not been. They get paid for nothing.
$38 million has been paid to Theo Speiring over the past 8 years to produce turkey results. Yet he's going to get a bonus this year. One of the reasons why is a thing called Velocity. Velocity measures all sorts of performance but a big part is operational health and employee engagement. None of which has a direct impact on financial performance which at the end of the day is the objective measure. Sure we want our people to be engaged but first and foremost we want them profitable. It's all a bit new age and tree-huggy and it's widespread amongst the corporate class.
And it's not like Theo suddenly brought corporate excess to Fonterra. Remember also that the previous CEO Canadian Andrew Ferrier took home $40 million of pay for his eight year term. Nice work if you can get it.
Fonterra got caught in corporate culture on steroids. Fancy buildings and pay and PR and consultants and dare I say it virtue signalling. When they started the free milk for schools they seemed to be oblivious to the feelings of their owners, the farmers, who were getting less than optimum returns. Great, they thought, now they're giving away the milk we made in the snow, the rain, the wind and the hail.
But CEOs and executive management at the end of the day are just employees. And the people who employ them are the Directors. And the Directors answer to the stakeholders. That's the way the power should flow. So always be wary of CEOs who think they're at the top of the pyramid.