Westland Milk Products chief executive Toni Brendish has been criticised for a “huge conflict of interest” over a $680,000 bonus if the co-operative is sold to Chinese company, Yili.
Bonuses will also be paid to other top management including $360,000 to its chief operating officer, $302,700 to its general sales manager and $100,000 to its chief financial officer.
Otago University senior accountancy lecturer Dr Helen Roberts said it appeared Yili was willing to pay the management to encourage farmers to sell their assets, raising a conflict of interest.
“If you were in that position would you say no?
“It’s a problem with these kinds of ownership structures where the management is supposed to represent the best interests of the true owners, but they have a conflict because they have their self-interest vested in their remuneration,” Roberts said.
Harihari farmer Jon Sullivan accused the Westland board of “taking the p…” out of farmers and that the sale was against New Zealand’s interests.
The bonuses are to be paid by Yili if farmers vote in favour of the sale on July 4 of the century-old company that is the West Coast’s biggest industry and employer.
The average West Coast farmer will receive $500,000 cash, plus the Fonterra equivalent payout price for the next 10 years. State-owned corporate farmer, Landcorp, will receive $11 million for the 3.25m shares it holds.
Brendish is paid $1.1m a year, and 16 further employees receive more than $200,000.
For years the co-op has struggled to make a profit, last year finally managing to run into the black with a $3.3m profit before tax.
Controversially in 2016 former boss Rod Quin was handed a departing bonus of $290,000, despite the co-op recording an after-tax loss of $14.5m.
Agriculture Minister and West Coast-Tasman MP Damien O’Connor has described the bonus deal as “outrageous and an insult to farmers”.
However, Westland board chairman Pete Morrison, who was paid $142,500 for his governance role, has defended the promised bonuses.
He said they were negotiated when the offer was made last year by Yili, and were standard to stop top management from leaving during the sale process, and would be made only if the deal went through.
“If senior executives left during the process it would have presented a picture of instability and that would have undermined possible interest and proposals,” Morrison said in a statement.
Management were also not involved in selling the sale to farmers and other stakeholders.
Sullivan said the $500,000 being offered to the average farmer had to be put into context.
“Last year I was $300,000 behind the price paid to Fonterra farmers and we’ve had that for the last few years, so the $500,000 is just a fraction of what we’ve missed out on.”
He also queried the role of Australian investment banker Macquarie, which is managing the sale. It would receive at least $5.8m if the sale did not go ahead, and much more if it got across the line, but the amount had not been disclosed.
Sullivan complained shareholders had not been given enough time to scrutinise the sale. He hoped it would be opposed and a “ruthless” person would be appointed to turn the co-op around.
Roberts queried whether Brendish would also have been promised the carrot of a continuing chief executive role at Westland.
“Someone’s going to have to manage it, at least be an interim manager, the new owners won’t know everything they need to know,” Roberts said.
The deal was likely to be a good one for the Chinese buyers because they knew the demand for high quality milk products in China and they would have direct access to the market there without having to go through a lot of red tape.
“Even though it might seem they’re paying a lot, in the long term they’ll make money,” Roberts said.
Source: Stuff
