Fonterra’s Corporate Accountability

Written By: - Date published: 6:00 pm, January 29th, 2009 - 32 comments
Categories: economy, national - Tags:

milk-bottle

Despite very serious allegations from former Sanlu CEO Tian Wenhua that an unnamed Fonterra board member influenced her decision to not cease production of milk powder known to be contaminated, on RNZ’s Checkpoint Fonterra Chairman Henry van der Hayden was adamant Fonterra would not be disclosing documentation to prove it advised Sanlu only a 0% melamine content was acceptable in its products (Sanlu issue starts at 4:04).

When Gail Woods pressed him to provide evidence that Fonterra had acted properly, van der Hayden sounded increasingly lame and worried as he repeatedly cited that “it was a matter of Chinese law…. We don’t have to do anythink [sic]”.  And with that we’re meant to accept that Fonterra’s part in the Chinese infant milk formula tragedy would remain a closed book.

Actually that’s just not good enough.

New Zealand relies so heavily on Fonterra for export earnings, and our entire primary exports reputation is so enmeshed with the Fonterra brand, that it deserves special scrutiny and needs to be held to the highest standards of accountability. Clearly van der Hayden doesn’t share this view going by the way he almost choked at Wilson’s apparently sacrilegious suggestion that perhaps Fonterra CEO Andrew Ferrier might even consider resigning.

I can understand if legal and commercial sensitivities mean Fonterra can’t lay everything bare to the public, but perhaps our Government might consider it prudent and ethical to formally investigate the evidence, on behalf of the New Zealand public, to establish the precise involvement of Fonterra in the Sanlu affair. Perhaps they could start with investigating exactly what Fonterra did advise and what actions Fonterra declared it would take if Sanlu didn’t comply with their 0% advisory? Some time-lines establishing exactly who knew what and when would also be helpful.

You may recall National screeching for enquiries when Clark was in the back of a Crown car exceeding the speed limit on a rural highway. Perhaps a matter of somewhat greater gravity, a matter involving the fatal poisoning of six infants and injury to hundreds of thousands more, might actually warrant a Government enquiry?

Will National hold our largest corporation to any standard of public accountability, or are we just meant to take Fonterra’s word and leave it at that? Seems an oddly uninterested stance from National for such an important issue.

32 comments on “Fonterra’s Corporate Accountability”

  1. Bill 1

    Glad to finally see a post on this.

    Can’t think of an instance where the board of a western corporation has been held to any meaningfully measure of account.

    Can think of numerous instances where corporate actions have resulted in widespread deaths.

    While I don’t agree with the death sentence, I can’t see why the Fonterra contingent of the board should not be investigated and if necessary held to account for murder.

    That’s my tuppensworth

  2. Ari 2

    Corporate responsibility from National? Are you joking? 🙂

  3. Paul Robeson 3

    Put them all to trial. And bring back the government and clever f^&cks like Cushing who didn’t do due dilligence on Ansett too.

    put those guys on trial too. And all the finance company guys.

    wouldn’t that do wonders for corporate accountability if the tough on crime message extended to them and included negligence through inaction or incompetence?

  4. Felix 4

    I can hear Key already.

    “Umm, yeah we’ll be having a bit of a look at that, but really, and the fact is, there’s not really anything a government can do, so yeah… but we will be having a look”

    sprout: god Felix, the likeness is so perfect it’s spooky

  5. Peter Burns 5

    Maybe Mr Fonterra ignored corporate responsibility, because he just endured a frustrating decade where the Miss Clark Absolute Power regime was completely devoid of any governmental responsibility whatsoever. Just look at the state of the economy Dr Caustic and Aunty Helen. Anybody held accountable? Yeah right – cows fly and the dam milkman just got mugged again by the hoodie brigade.

  6. gingercrush 6

    Its a co-op not a corporation. I don’t see the need for an inquiry I do see a need for the board to be accountable and I am certain the farmers, the people who own this co-op and pay these people’s their money will expect accountability.

  7. The sprout,

    Wilson it wasn’t. Funny but as I recall tonight the correspondent guy in China made the same faux pas. Till Gail Woods put him right..

    for the rest and future-bound for a solid reputation out of the recession, a Royal Commission of Inquiry… huh.. a darned sight more useful than wonton waste on foregone climate conclusions.. and solutions…

    sprout: thanks, realized it wasn’t Wilson eventually but couldn’t put a name to the voice. cheers
    btw, is that wonton or wanton?

  8. rave 8

    Ho hum. What price profits?
    Nationalise the bastard. Who is going to make Fonterra accountable if not the NZ and Chinese people?
    Fonterra only exists on the teat of the NZ public who subsidise the dairy industry to hell.
    Nationalise it, allow working farmers (not Key-type corporate farmers) to keep their shares, and any further state investment and profits from public subsidies become public ownership.
    http://redrave.blogspot.com/2008/09/fonterra-and-state-monopoly-capitalism.html

    sprout: great article, thanks rave

  9. gingercrush 9

    rave go back to your wee shed with the other nutters. You pretend to act for the “workers” but I don’t think most workers would agree with you one bit. Talk to real New Zealand workers in the rural community and the small towns around this country. Not just the few urban workers you may keep in touch with.

    You don’t even make a case for how New Zealand subsidises the dairy industry in your article. I also noted that you used Fannie Mae and Freddie Mac in that article. The neo-liberals and more market orientated people would point to government intervention where they required those companies to make loans to families and people that could not afford home ownership and normally would not receive mortgages. And that is what helped cause the current sub-mortgage crisis.

  10. mike 10

    From a singapore paper – jan 5

    “On 13/8/2008, Sanlu decided after another meeting that products with less than 10mg/kg of melamine could still be sold as usual. Products with more than 10mg/kg should be temporarily suspended for sale. Products with around 20mg/kg of melamine should be gathered to replace products with even more melamine. All products with melamine should then be gradually removed from the market.

    After the above plan was disclosed to the public, competitors were shocked. Before this scandal, Sanlu had been known to have high quality standards. However, the above plan proved that Sanlu opted for short-term profits instead.

    It should be noted that the product replacement plan was based on the EU standards supplied by Sanlu’s New Zealand shareholder Fonterra.

    Although Fonterra had initially disapproved the plan, after further discussions, Fonterra did not insist on disclosing the problem to the public. Tian Wenhua disclosed to the police during investigation that both Sanlu and Fonterra agreed on the reason to be used for the product replacement plan. Tian Wenhua believed that as Fonterra was involved in the planning of product replacement, they should also bear certain responsibility.’

  11. BLiP 11

    Welcome to globalisation New Zealand.

    This is what you get when you mix “the market” with national boundaries. Anyone remember the Bhopal disaster?

    And the underlying, actual cause = profit motive.

    What’s going to happen when China demands that the Fonterra executive(s) concerned turn up for a court hearing ? Anyone read the trade agreement fine print when it comes to this?

  12. BLiP 12

    Goober John Key Said:

    ” . . . “Umm, yeah we’ll be having a bit of a look at that, but really, and the fact is, there’s not really anything a government can do, so yeah but we will be having a look . . . ”

    Translation: “we are taking this seriously and will be discussing how best to protect New Zealand’s interests at a summit where we will set a date for formulating the decision making process at which time there will be full consultation with all stake holders who will decide how best to procede going forward . . . “

  13. You may recall National screeching for enquiries when Clark was in the back of a Crown car exceeding the speed limit on a rural highway.

    Ridiculous, to be sure. But also not a useful analogy, since that incident involved govt officials and employees, and the incident under discussion doesn’t.

    Will National hold our largest corporation to any standard of public accountability…

    It’s not “our” corporation. It’s a co-op, so it belongs to the members of the co-op and it’s accountable to them, not us.

    Now, if you really do believe the Chinese govt, through some careless oversight, neglected a golden opportunity to make rich foreigners rather than its own Party officials responsible for this whole mess, I have this large bridge in Auckland for sale at a very cheap price…

  14. Ari 14

    It’s not “our’ corporation. It’s a co-op, so it belongs to the members of the co-op and it’s accountable to them, not us.

    Right, so it’s none of our business what a co-operative that represents our largest export industry does?

    That’s a very curious position, given the possible impact for other Kiwi exporters.

  15. Pascal's bookie 15

    “I also noted that you used Fannie Mae and Freddie Mac in that article. The neo-liberals and more market orientated people would point to government intervention where they required those companies to make loans to families and people that could not afford home ownership and normally would not receive mortgages.”

    And they’d be lying their asses off. Another f’ckn right wing myth takes flight. Do you actually believe this or are you just pushing it because it suits? If you do believe it, have you looked into it? Checked out how much ‘subprime’ mac and mae were into compared to the non regulated sectors? Looked at when Mac and Mae got involved (to the small extent that they were)? Thought about why they were so late in the game?

    Or is it just easier to repeat GOP talking points?

  16. vto 16

    If I owned one-half of a business that had killed and maimed such a HUGE number of babies in such a manner I wouldn’t be able to live with myself.

    Fonterra is steeply lacking in its approach to this issue, which I do not think will go away quickly. In fact it will grow.

    Fonterra is negligent and callous.

  17. vto 17

    Actually, I would like to alter that slightly… The owners and directors of Fonterra are negligent and callous.

  18. Pat 18

    “Actually, I would like to alter that slightly The owners and directors of Fonterra are negligent and callous”.

    The owners of Fonterra – do you mean farmers?

  19. vto 19

    yes. Owners have ultimate responsibility.

  20. Pat 20

    “If I owned one-half of a business that had killed and maimed such a HUGE number of babies in such a manner I wouldn’t be able to live with myself”.

    What if you owned 1/10,000th of that business?

  21. toad 21

    If they won’t release the documentation to verify their assertions, I think it is time to call for a Commission of Inquiry to find out exactly what Fonterra’s role in this tragedy was.

  22. Felix 22

    What’s your point, Pat?

    You’re responsible for what you own, aren’t you? If you and x amount of other people own something collectively, surely you are all collectively responsible for it, no?

  23. the sprout 23

    “Owners have ultimate responsibility”

    particularly in the absence of any apparent interest in holding the Board transparently accountable and clearing Fonterra’s name.

    “…so it’s none of our business what a co-operative that represents our largest export industry does? That’s a very curious position, given the possible impact for other Kiwi exporters”

    Exactly, that’s my point. Regardless of ownership structures, the primacy of Fonterra in our economy means all NZers have a real interest in getting this investigated and cleared up properly. It’s not going away so the sooner the better.

  24. the sprout 24

    “What if you owned 1/10,000th of that business?”

    that would still equate to injuring hundreds of infants

  25. grumpy 25

    Whoever thought a bunch of dairy farmers could run an international company is an idiot.
    When the Chinese Govt. comes looking for damages from Fonterra and accountability from directors the only way it can end is Chinese ownership of Fonterra.

    Then the dairy farmers (NZs worst employers) will get the outcome they deserve.

  26. sunny 26

    Can anyone with a scientific/farming background explain this one for me please? Melamine was added to watered down milk to fool tests for protein levels right? Why then didn’t the drop in milk fat or milk solids in the watered down milk give the game away ? Or does melamine mimic fat/solids as well? Sanlu was making all kinds of stuff out of this poisoned milk besides baby formula…again if you water the milk down the ‘recipes’ for those other products (yoghurt, chocolate etc) must have been affected and should have raised suspicions from the very beginning.

  27. Nick 27

    You say “New Zealand relies so heavily on Fonterra for export earnings” …

    Do we really? I think it’s the farmers we rely on – Fonterra are just their creaming the profits.

  28. tsmithfield 28

    So, various countries may have standards that will accept milk with trace levels of some contaminant or another. That is not to imply that these various countries would consider it acceptable behaviour to deliberately add the contaminants.
    Therefore, on the face of it, there seems to be absolutely no justification for the Chinese exec to claim that it was somehow OK to keep adding melamine because Europe or whatever had some standard for melamine levels.

    The other thing is that the level of melamine in the Chinese milk that was causing the health problems was many multiples higher than any acceptable world standard in any case.

    So I don’t see how the Chinese exec can have any valid case.

    That is not to say that Fonterra is necessarilly squeaky clean in all this though.

  29. mike 29

    Sunny – cant you see what was going on – they werent testing anything !!!

    This was the great fonterra with its so called high standards with a 43% share in this company (its minority, but not minor) not insisting on tesing anything.

  30. Tim Ellis 30

    When the Chinese Govt. comes looking for damages from Fonterra and accountability from directors the only way it can end is Chinese ownership of Fonterra.

    I don’t see how that’s the only way it can end at all. Fonterra’s ownership structure is defined by New Zealand statute. Please explain how the Chinese government can force this to change?

    Sanlu was a Chinese incorporated company, with Chinese management, a predominantly Chinese board, predominantly Chinese ownership, and Chinese regulatory structures. There hasn’t been any evidence, anywhere, that Fonterra recommended the use of melamine. Fonterra blew the whistle on the melamine contamination, after Chinese managers and officials stalled on it.

  31. sprout,
    btw, is that wonton or wanton? That’s my wandering little finger.. it’s also funny (tks for the laugh) because I thought I’d checked that.

    to the guy relating Fonterra’s “profits” I’d add how the same likely folks there have stacked considerable debt/derivatives. Rave, maybe they do this kind of thing to evade nationalization..?

    bottomlining I’d say mike has it right, the Sanlu investment always looked opportunistic. At the time why not, there was some market potential!

    So I guess the only satisfactory answer is to afford high standards all round, starting with people at the top who always think of food product/s and human consumption this way

  32. tsmithfield 32

    Here is a multiple choice puzzle. Be careful. Its a bit tricky.

    Scenario: You are an executive in a milk company. Someone gives you documentation showing standards for contaminants in milk. Most of the standards allow for minute traces of contaminants including melamine.

    As an executive you decide:

    a) That the various standards indicate that it is OK to put 1000 fold of the acceptable level of melamine into your milk.
    b) That the standards indicate that various countries prefer to have at least a little bit of melamine in their milk, so you should put some in.
    c) That it is best practice to attempt to eliminate melamine from your milk as far as it is humanly possible..

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