Baldock Larry: Wool Industry Restructuring Bill — Second Reading Instruction to CommitteeCWH In Committee Third Reading 
Baldock Larry: Wool Industry Restructuring Bill — Second Reading Instruction to CommitteeCWH In Committee Third Reading 
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LARRY BALDOCK (United Future) 
: 
 I delayed taking a call on this bill because I wanted to allow the members who have been on the Primary Production Committee and have vastly greater experience of the wool industry than I do to speak first. Some of those who are unfamiliar with this bill may be surprised to learn that the issues it addresses have been the subject of considerable debate and controversy within the wool industry over a number of years. United Future had no representation on the select committee that examined the bill and as someone looking at the bill from outside this process I can say that the issues surrounding the restructuring of the wool industry are challenging in their complexity. I hazard to suggest that the MPs who did sit on the committee also found it challenging to untangle the network of organisations involved in this process and I think they have done a very good job in trying to address the concerns of the 33 groups and individuals who made submissions. 
The most important changes that the committee has made have been in response to a lingering concern that the new grower-owned organisations would be vulnerable to corporate raiders who might strip assets by acquiring a majority stake as occurred following the restructuring of the pipfruit industry. Vulnerable assets include accumulated tax losses and intellectual property and funds to be invested in the joint-venture biotech firms Ovita and Covita. The draft company constitutions prohibit the sale of shares to non-growers for the first 2 years and prevent shareholders from holding more than 5 percent. Those restrictions can be changed only by amending the constitution. Fifty-eight percent of growers approved this proposal in the referendum. The committee included a new clause specifying that those safeguards be included in the constitutions. Final approval of the constitutions and the restructuring plans is in the hands of the Minister of Agriculture. 
United Future is reasonably satisfied that these changes will help to safeguard the assets of the growers but the only real way in which that can be guaranteed is if the growers get involved in these organisations themselves. An example of this can be found in the recent announcement of the restructuring of the Wool Research Organisation of New Zealand into Canesis Network which has resurrected concerns about corporate raiders as the effort to attract investor capital is likely to reduce grower shareholding. This bill—nor this Parliament—cannot stop that restructuring from taking place. 
We have had many calls to put this bill on hold so that there can be a fresh invitation for a mandate from growers across the country. But no one here is convinced that that would produce an outcome any different from the one we are facing right now. In fact in conversations that I have had the growers themselves have admitted that if a referendum or a mandate was sought to be achieved in the next few months there would still be a huge lack of participation. Even if meetings were held in woolsheds across the country for a year to try to explain the new structures it is unlikely that we would end up with a different result. The structures themselves are complex and it would take an enormous effort to try to explain them satisfactorily. 
In my first reading speech on this bill I urged the woolgrowers of New Zealand to participate and to become involved in the submission process at the Primary Production Committee and I do commend the 33 submitters who did come to the select committee. I think they have seen satisfaction in some of the changes that have been recommended. But without going into great detail I say that the best way that the growers can ensure their interests are represented is to make sure they become active in the new entities Wool Equities and SheepCo which will have interests in Canesis Network. 
Other changes recommended include a cut in the number of directors appointed to the transitional company from a maximum of seven to five. The directors may still be selected from the current directors of the Wool Board despite the widespread disillusionment with those personnel amongst growers and the suspicion that the reforms are designed to perpetuate their careers. As Doug Woolerton has said the same faces appearing in new places is of concern but the answer to that concern is participation by the growers themselves. There is also a fear that those same personnel will install themselves in the top positions of the new entities as I said. Once again if the growers want to change the situation all that they need to do is to get involved in these organisations and to make sure they vote for those whom they want to lead them. The Minister has yet to approve the final constitutions but from the drafts it is clear that there will be opportunities for the growers to have a say on who sits on the boards. I would like to say that there could be some improvement to the bill to make it clear that the new directors particularly those of Wool Equities would need to face re-election at the first annual general meeting. That is not clear to me in the draft and I think it would be an improvement to make sure that it was clearly spelt out so that the growers would know that within a year’s time they could give a mandate to that board through an election process. 
The select committee extended the eligibility criterion for shares from a raw number of 250 sheep on 30 June 2002 to incorporate the average over the last 3 years. But calls to set a lower minimum were rejected. Any number that is set will be arbitrary and although growers with fewer than 250 sheep may have contributed levies over a long time some threshold has to be set that will overcome the transaction costs of distributing the shares. After all we are talking about only around $100 for someone who has 100 sheep. Merino growers will not be able to swap their redeemable preference shares in the transitional company for shares in Merino Grower Investments because it already has enough capital but the growers will still get exchangeable shares that can be converted into ordinary shares. 
Although the committee addressed some of the growers’ concerns particularly those surrounding the issue of corporate takeovers others remain. It is still claimed that there is no mandate for the new structure as the referendum results reflected an overwhelming urge to dismantle the board rather than necessarily constituting an endorsement of an alternative model. This point has been spoken to by other members before me. Some also point to the low turn-out and say that there is even less of a mandate for the proposed restructuring. By that logic most Presidents of the United States have not held a mandate to govern the United States. President Clinton in 1992 and 1996 was elected on less than 26 percent of the vote. 
Mr SPEAKER 
: Please come back to the bill. 
LARRY BALDOCK 
: If someone does not vote then it is very difficult for him or her to complain about the outcome with any credibility. Unfortunately this malaise is reflected in the industry and the growers need to think about their own involvement in it. Granted their interest may not be heightened by the complex nature of the structural reforms but if the referendums did not offer a mandate for new structures what alternatives did those growers have in mind when they voted? It would have been impractical to remove the Wool Board yet not think about what would be done in the aftermath. But growers are practical people and I think that if they do want to have some influence over the new entities there will come a point where most of them want to go past all the restructuring details and to find out what the entities might offer growers once they are set up. The best way for them to ensure that the new bodies work for them is to get involved in them. 
From the point of view of those running Wool Equities there will be a big incentive to listen to the growers and to respond to them in order to ensure that they hold their shares. Growers will have representation on the Wool Research Organisation through their involvement in SheepCo and through their involvement in Wool Equities on the other side of Canesis Network. I believe that we are offering them the best we possibly can.