Wool Industry Restructuring Bill

I raise a point of order, Madam Chairperson. In view of the previous vote, New Zealand First will withdraw its proposed amendments to clauses 18 through to 29.

I rise to speak briefly on Part 3. Clause 18 requires that the board must prepare a restructuring plan, which is right and proper. But, again, I think the concern of the farming industry has been the question of who should prepare this restructuring plan, rather than whether a plan should be invoked. I have heard comments that many members of the existing board will reinvent themselves in terms of these new structures.

To my certain knowledge the only person who has resurfaced is Mr Mark O’Grady, who will be the chief executive, under contract to Wool Equities. This is a fixed-term contract for a period of 2 years. It was essential, according to Wool Equities, that it have somebody with an in-depth knowledge of the industry to assist the new directors in their deliberations as to how they believe the governance of Wool Equities should take place. They needed somebody who had hands-on management experience. It is perhaps a very debatable question as to whether Mr O’Grady was responsible, in whole or in part, for the fortunes or misfortunes of the board in the past, but in the judgment of the new board of Wool Equities, he was deemed to be the best person suitable to assist the new board to come to grips with the complexities of the wool industry.

I do not see the names of previous board members, other board members, or even current board members, resurfacing. So I think the one fear, perhaps justified, that my colleagues have has perhaps been a little overstated, when we look at Part 3. As I said earlier, I think it is very important that the employment of individuals within this new structure, generally speaking these days, is under fixed-period contracts. If the growers decide they do not want a specific individual as their chief executive, they can relay that to the board—indeed, they can sack members of the board for having appointed this particular fellow, and that is as it should be. But the governance of the board should be left to the people who now govern it. It is appropriate that they should have the right to make their appointment, rather than the wider industry having a vote on it. It is just not practical.

One of the concerns I have in the farming world is that many farmers do not understand that it is not their job to have a hands-on, day-to-day influence over the running of a company, whether it be Fonterra or whatever. We place that in the hands of the individual, the chief executive, and it is his or her job to perform in the role, and to be accountable as well, but essentially if the chief executive does not perform, then hopefully his or her contract will not be renewed.

However, I do understand the concern of my colleague Mr Woolerton. It was a concern that I also held in a very genuine way. But, after quiet reflection, I have determined that it is appropriate that the new board of Wool Equities will determine whom it shall appoint, and not have myself or other politicians stick their oar in and say that it is quite wrong to appoint a certain individual. That is the board’s choice, and the directors of Wool Equities will stand or fall on the correctness of that choice. That is one contribution I would like to make to this part, and I look forward to my colleagues’ contributions to Part 3.

I rise today as the National Party spokesperson on this bill to support the Government’s Supplementary Order Paper, which corrects the misrepresentation on the calculation formula. As a responsible National Party we certainly support the Supplementary Order Paper amendments, and we will be voting that way.

I want to correct a couple of things that may have inadvertently crept in. The first is the suggestion, and I know that Mr Eckhoff did not mean this personally, that we would even want to involve ourselves in the administration of the wool industry. [Interruption] I know that it was not put in quite that way. We have just lost the last chance, quite frankly, to have somebody who is independent look over the process. It was not to involve ourselves or this Parliament in the administration, and certainly not to be casting aspersions on the good names of any people who may be employed in the wool industry henceforth. We have just passed a critical time.

I say to the woolgrowers of the future—and I am not lecturing them, but this is an observation that I think all members of the select committee would make and agree with me on—that the lack of participation in the industry by growers is lamentable. I know many of the reasons for that. It is a matter of having been ground down over the years. It is a feeling that their voices have not been heard. It is all those things. But it is very hard for a select committee and for a Government—those of us who are involved in the process—to get a fair understanding from such a small participation of grower members.

I would like to make a comparison, but not necessarily suggest that they follow the same route as the Fonterra board, which put up three people for re-election. The price was not as they had hoped it would be, and the returns were not as they hoped they would be, so two of the directors were fired. The farmer participation dealt to them very, very quickly. I am not so naive as to believe that it is just the farmers. There was a lot more politics. Further to that, we have had the summary dismissal of Fonterra’s chief executive officer, in favour of another person. That level of participation is very, very healthy. I urge the woolgrowers of this nation to involve themselves in the new structures that are being put in place, and to watch over them very, very carefully because a lot of the things that we suggest could go wrong, and that some people may profit from individually, are beyond the scope of this bill. They are in the companies that are set up under the Wool Equities banner.

Mr Eckhoff is absolutely right. We have no place meddling in those companies. We have no place directing people how to administer those companies, but we do, surely, have the ability—and, I suggest, the responsibility—to urge farmers to participate fully in the democratic process in those companies, and to ensure that the things we hope and pray will not happen do not happen.

I would like to comment on clause 19A, “Constitutions”, and specifically on the constitution of Wool Equities. I bring this to the Committee’s attention, because some concern has been expressed at the possibility that growers will lose control of the industry within a couple of years. The bill states that a shareholder must not sell shares in Wool Equities to a person other than another grower; a person who is not a grower must not buy shares or become a shareholder in Wool Equities; a shareholder and an associated person must not acquire, hold, or control voting rights for, directly or indirectly, in concert or otherwise, more than 5 percent of the total number of shares in Wool Equities.

I think this is a very sensible part of the constitution of Wool Equities that does give what one might call a stand-down period—a shake-down period—that allows farmers a couple of years to see how things are progressing and how things are moving. If they are moving in the direction the farmers think they should be moving, then they can vote accordingly after the 2-year period. I am well aware that the bogeyman—if one could call it that—of corporate raiders taking control of farmers’ assets rears its head from time to time, and the example has been used of the Guinness Peat Groupbuying into ENZA and taking control of that company.

I must say that I thought: “Well, gosh, is this a good thing?”. The reality is that if we ask the growers, who are shareholders and sellers of their product, they say that it has been a good thing. I make the point that, as I have said before, what these companies need dramatically is capital to develop. It is like having a farm but no money to put fertiliser on, fence, or build water supplies. The companies must have access to capital to be able to develop. Whether a company like the Guinness Peat Group is coming in for some benign purpose, some productive purpose, or otherwise, really does not matter, because farmers are not compelled to be members of Wool Equities if they do not wish to be. They can sell their shares, get out of the industry, and perhaps invest in some other aspect, if they so choose.

I do not think it is appropriate for myself as a woolgrower to tell other growers that I believe they should leave their money in, or take it out. That is entirely for them to decide. But the constitution, under this clause 19A, allows for this very important stand-down period—for want of a better expression—in which farmers will see the trend starting to develop, whether or not it is appropriate, and react accordingly. I do not see the injection of outside capital, and the potential—and I emphasise that word—for outside control to be something that farmers should be overly concerned about, because if that industry becomes terribly successful, they, as shareholders in Wool Equities, will benefit from that as well. Indeed, the demand for their product on the auction-room floor, or by private sale, will also be reflected in the price they receive for their product.

So I do not think that we should be overly concerned about the prospect of non-woolgrowers, or those who are not currently industry players, taking some sort of a controlling, or a 20 or 30 percent, stake and injecting much-needed capital into this industry. It is something that probably will be needed. But I also make the point that this is the very reason that Canesis has developed to ensure that the capital it needs comes pretty much from New Zealand sources, rather than having outside capital come in to develop these quite exciting products that the Wool Research Organisation of New Zealand has developed on behalf of the woolgrowers of this country.

The question was put that the amendments set out on Supplementary Order Paper 101 in the name of the Hon Jim Sutton to clauses 20B(2) and 20C(2) be agreed to.

Amendments agreed to.

Part 3 as amended agreed to.

Bill reported with amendment.

Third Reading