Ardern Shane: Dairy Industry Restructuring Amendment Bill (No 2) — First ReadingText is incorporated into the Bound VolumeArdern Shane: Dairy Industry Restructuring Amendment Bill (No 2) — First Reading[Sitting date: 15 May 2013. Volume:690;Page:9994. Text is incorporated into the Bound Volume.]SHANE ARDERN (National—Taranaki - King Country): It is a privilege to rise to speak in this debate tonight but unfortunately for the previous speaker Damien O’Connor the National Party will not be supporting the member’s bill the Dairy Industry Restructuring Amendment Bill (No 2). There is a range of reasons for that but let us start right at the beginning with a little bit of history. Fonterra was not formed by the Labour Party despite the comments of the previous speaker. Fonterra was formed because a group of farmers if you go back far enough in time came to the Government of the day saying that they were struggling as a lot of our colleagues in other industries in New Zealand do with collective buying by massive buyers. In fact most of those buyers at that stage were based in Tooley Street in London.Hon Damien O’Connor: When was that Shane?SHANE ARDERN: They used to travel out to New Zealand—I think it was about 1936 Mr O’Connor slightly before you were born. It may have been before you were born. Those buyers would come out to New Zealand. They used to trade one dairy company off against the other and drive the price down. Does this sound familiar? Does anyone know where they could find an industry in New Zealand today where similar types of tactics take place? That is exactly what was happening.So the Government of the day said to the industry: “What would you like?” and the industry said: “We would like to have a much more focused marketing structure.” History has a wonderful way of repeating itself. So from that the New Zealand Dairy Board was formed. After a long period of trading under the name New Zealand Dairy Board the industry itself again came back to the Government and said: “This is a very tiresome process. Every time we want to change or make some modification or change market structures or do something different we are constantly coming back to the Government cap in hand for legislative change and we think we can go it alone. We do not need the single-desk legislation so we would like a reform of that.” And from that the 2001 Dairy Industry Restructuring Act was born. It crossed two Governments. It was first initiated under the Shipley Government—Hon Damien O’Connor: Rubbish.SHANE ARDERN: —and it was passed by the incoming Clark Labour Government with Jim Sutton as the Minister. That is the history. Go back and check it to see whether I am right or wrong. That is the history. I remember it well. I served on both select committees in both Parliaments.So at that point in time around 10000 shareholders of what was the combined industry across New Zealand decided that they could form critical mass by merging the two largest dairy companies in New Zealand which were Kiwi Cooperative Dairies and the New Zealand Dairy Group and form a new company taking on board the Dairy Board called Fonterra. It was called GlobalCo and then the Global Dairy Company I think originally and in the legislation it is known as the “new co-op”. And the name Fonterra was born out of that.As an end result of that we have seen unprecedented growth in that industry in the history of New Zealand and actually as the previous speaker said it has now become 40 percent of global traded dairy products. It is a success story. No matter how ideologically driven you are or what position you come from or how counter-intuitive the model might be to you or what other arguments someone might put up about it it has been successful. The facts speak for themselves. And it is a New Zealand - owned company—entirely owned by New Zealanders; 10500 shareholders—and so we did not want to see it broken up or destroyed or eaten away or floated off on the New Zealand Exchange or whatever the argument of the moment might be.But then it becomes a question of where the State stops and starts and how much State intervention there should be. Some would argue from a pure point of view that the Dairy Industry Restructuring Act itself should go and that there should be no legislative control or Government involvement or meddling in this. Instead of that we have a very complex Dairy Industry Restructuring Act that puts a whole lot of constraints on the behaviour of Fonterra and the requirements that it must meet. And that is where Parliament has reached a consensus and as the previous speaker said pretty much with cross-party support. That is what is there at the moment.So the question then becomes what other protections or other such things should the State have or should put in place either for the consumer or for the company itself. The company itself by 75 percent—this is a figure that Parliament does not understand. Give me a bit of a hint how many times you get 75 percent support in this Parliament for a piece of legislation or a policy position—Sue Moroney: Actually a lot.SHANE ARDERN: It happens from time to time but not that often.Sue Moroney: It happens a lot.SHANE ARDERN: It happens from time to time I accept but not that often. So 75 percent of those 10500 shareholders voted at their annual general meeting to put a cap of 20 percent on the tradable amount of their shares which is exactly what the member’s bill is asking to do. And of course if you do further analysis on that what you will find is that the 20 percent can never actually be 20 percent; it is up to 20 percent. Because of the trading in and out that takes place in this Trading Among Farmers arrangement the company itself has to make sure that it never exceeds around 18 percent—the last figure I saw—because otherwise it could momentarily be in breach of its own constitution.So 20 percent is really a glass ceiling if you like that the company must pull up before it reaches that level. It currently sits at between 10 percent and 15 percent. I do not know that anyone could mount a vigorous argument that that is a dangerous position for the company to be in and a position that could likely end up with the dissolution breaking up floating or management takeover etc. of the company. A further protection that the company has within its constitution is that the board must be made up predominantly of farmers. The last time I looked at it—and I stand to be corrected by the member—they have now voted for a nine-member board with three independent directors. I do not know whether that has actually been implemented yet but that is the direction they are heading into overwhelmingly controlled by the farmers themselves—elected from within their shareholder base. Are they going to go and do something that the farmers do not want? They have tried.There have been times when the leadership of the company has decided that it is going to go off in a direction that its shareholders do not like. One thing that I can tell you as a shareholding farmer—and I declare that at this point—is when we get unhappy with the board we sack them. Or we certainly give them the message: “Change direction or we will.” That has happened on a number of occasions. I understand theconcerns that have been raised but I think it is actually fair to say that right at this point in time the Fonterra structure is what the Fonterra board has asked for what the Fonterra shareholders want to see and I think the success of Fonterra speaks for itself.It does frustrate me that I have to come back to this House time and time and time again and justify the success of this company to Parliament. It seems to me that it is overwhelming but it does frustrate me that you have to come back. I guess it comes down to the final point and that is: do you trust them or not? Do you trust—and I am not talking about you Mr Assistant Speaker I am talking about Parliament; I am sorry to bring you into the debate—these 10500 hard-working dedicated farming families who have built this industry or not? It is that simple. My money is with the farmers.