1 Oct 2015

Fonterra boss offers $4m salary freeze

4:29 pm on 1 October 2015

The chief executive of Fonterra has asked for his multi-million dollar salary to be frozen this year as the co-operative goes through major cost cuts and slashes hundreds of jobs.

Fonterra chief executive Theo Spierings addressing shareholders.

Fonterra chief executive Theo Spierings addresses shareholders at a meeting earlier in the year. Photo: RNZ / Diego Opatowski

Theo Spierings requested the freeze on his base salary on the same day Fonterra announced it was slashing hundreds more jobs as part of a business shake-up, taking total layoffs to 750.

That came just days before the company released its annual result.

A spokesman said Mr Spierings went to a meeting of Fonterra's people, culture and safety committee on 21 September and requested that his base salary of about $4 million for the 2015/16 year be frozen.

Mr Spierings' pay is made up of that base salary and bonuses, which are known as performance incentive payments.

The spokesman said the chief executive's salary, like all senior executive salaries, was based on independent, international benchmarking and was approved by the people, culture and safety committee.

The freeze for the 2015/16 financial year does not include any bonuses Mr Spierings might be paid for the co-operative's performance.

Last week, Fonterra revealed it gave Mr Spierings a $750,000 pay rise to $4.9 million, including incentive payments, for last year, when farmers received a record payout of $8.50 a kilo of milk solids.

Whangarei dairy farmer Phil Halse told Morning Report Mr Spierings' request for a pay freeze showed he was feeling the effects of the low milk price. "And he needs to," said Mr Halse.

"It's imperative that our leaders keep in touch with the grass roots people, people who are producting the milk. The fundamentals of a co-operative [are that] we share the good times and we share the bad times."

Some farmers attending shareholder meetings this week said the pay freeze was a cynical move, as Mr Spierings was unlikely to get a pay rise this year due to the low milk price. Another farmer, however, said the salary debate was a distraction from good stories about Fonterra and the improvements it had been making.

Federated Farmers Dairy chair Andrew Hoggard told Morning Report people in New Zealand tend to get wound up about high salaries, but the Fonterra chief executive's pay had to be compared to other big international dairy company leaders.

"What we've got to remember is Fonterra is one of the largest milk processors in the world, if not the largest," he said.

"When we're talking about the salaries for Fonterra staff, for management, we really do need to be comparing them to the likes of Arla, FrieslandCampina, Dairy Farmers of America, similar sized companies around the world."

A Fonterra spokesman reiterated that a salary of that size was to be expected at Fonterra as the country's largest and only truly global company. The co-operative reported $18.8 billion in turnover for the year that Mr Spierings received his pay rise.

Call to give back bonuses

Northland farming leader Bill Guest, meanwhile, said Mr Spierings should return the bonuses he had been paid for the past year.

He said Mr Spierings was aware that dairy workers were on the verge of signing a 14-month zero wage increase agreement and any pay rise for the chief executive would derail it.

Mr Guest said the Fonterra boss had already pocketed an extra $800,000 for the year, and he should pay it back, out of respect for farmers who are having to ask banks if they can afford to buy groceries.

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