The relationship between Fonterra’s board and its shareholders is at rock-bottom and an independent facilitator has been brought in to ease tensions.

Differences over the cooperative’s future capital structure have fuelled the conflict.

Fonterra leaders made the admission after concerns were raised by Waikato dairy farmer John Bluett at the cooperative’s annual meeting in Palmerston North last week.

Fonterra chairman Henry van der Heyden says there is tension between the board and the council.

Heyden told the meeting that an independent facilitator has been brought in to sort out differences.

‘We all want the same thing out of the cooperative,’ he says.

‘The difference is how we get there.’

The cooperative board is under fire for its handling of the capital structure review.

Shareholders claim the board’s preferred option was dumped on them without consultation.

Farmers have made it clear that retaining ownership and control of the cooperative is a priority.

The Shareholders Council has been publicly critical of Fonterra’s board for failing to listen to its concerns.

Van der Heyden says there is ‘constructive tension’ and both parties are meeting regularly.

Fonterra Shareholders Council chairman Blue Read says there are times ‘when things go wrong and things go right’.

But he agrees that the relationship between the board and the council has worsened.

Read says the council’s role is to monitor performance of the board.

‘We make no apologies for this,’ he says.

‘But we don’t go looking for trouble.’

The Fonterra board is keen to resolve the capital structure issue within the three-year timeline issued in 2007.

The cooperative is bleeding money through shareholder redemptions and paid out $600 million to shareholders last season for returned shares.

It is also seeking extra capital for growth.

Van der Heyden says the need for capital and the risks posed by redemption will not go away.

But the Shareholders Council says the capital structure decision should not be rushed.

Read says all parties must be mindful of the magnitude of change being contemplated.

‘The choices Fonterra farmers will be asked to make will be irreversible and it is essential that we take the time to get this right.’

The council has asked Fonterra’s board to provide a summary of the expected impact if shareholders choose to make no change to the cooperative’s capital structure.

Shareholders are also seeking information on capital structure options that will mean Fonterra remains a fully integrated farmer-owned cooperative.

‘Active debate is essential and differing viewpoints need to be fully explored in order to achieve the best outcome possible. One that will stand the test of time.’