A governance development programme saw Donna Smit climb the ranks in boardrooms. By Claire Ashton.
Donna Smit’s governance resume reads like a who’s who of the primary industry sector; Dairy Women’s’ Network trustee, and directorships of EastPack, Ballance Agri-Nutrients, Primary ITO, Eastern Bay Energy Trust, and until November 2022, farmer-elected board director at Fonterra.
Her path to such a pivotal governance role began when she saw an advertisement in a rural magazine for the Governance Development Programme with Fonterra which was established in 2006 to help address dairy industry and rural sector succession needs, and boost regional governance.
She had been a company administrator at Eastpack for 24 years, where they took it from a small co-op to the largest supplier of Gold Kiwifruit to Zespri.
Eastpack was close to home, family, and thier Bay of Plenty farms. However, Donna had a bit of a wake-up call driving home, yet again late for dinner, and decided it was time for a change and applied successfully to the governance development programme.
Donna took part in the Fonterra governance programme for two years while wrapping up work at EastPack. The programme was intensive at times, and involved week-long training sessions, book reviews, personality tests and coaching.
Persistence and her stellar resume saw Donna’s applications to director positions on Fonterra and Ballance boards be accepted simultaneously, however, with a clash of meeting times, Donna opted for the Fonterra role in August 2017. She had previously applied and been ‘first loser’, however, perseverance pays. She wanted to be on the team to take the co-op back to its core values.
“You could see there were issues at Fonterra, and you could see that the place could be so much better when you see how other boards operate. There was a dominant leadership culture in that board at the time, and that’s not how highly effective boards run – you need to run the full skills of the whole team. Alongside that, Fonterra’s strategy to be globally relevant wasn’t working.
“The whole strategy was at odds with our competitive advantage, quality, highly nutritious pasture-based milk,” Donna says, and the strategy to focus on New Zealand milk resonates well with farmers.
“To me, no matter what board you are on, you have to work out; how does this business create value and then how do you go after that value?”
The Fonterra Board, during Donna’s time, has had three different chairmen; John Wilson, John Monaghan and now, Peter McBride, two chief executives, and two chief financial officers. The previous 12-member board was reduced to 11, with nine out of the 11 having a tenure of six years or less, only Leonie Guiney and Clinton Dines have been on the board longer.
This relatively new board has seen major changes in strategy, purpose, risk settings, culture and capital structure. Donna would also like to compliment the openness and transparency CFO Marc Rivers has brought to both the reported financials and the board packs.
“It’s really important we understand what creates value in a global business of this scale and transparent financials go a long way in understanding the drivers. “
Now, after six years as an elected director on the Fonterra board, Donna steps down come
November from her two terms, a period over which the co-op has has seen a see-saw in prices from the highest forecast farm gate milk price (2021-22 forecast midpoint $9.30/kgms ) to in 2019, the worst reported net loss after tax in Fonterra’s history (a $605 million loss, due to a $826m write down and one-off accounting adjustments to DPA Brazil, Fonterra Brands NZ and China Farms.)
“It feels good what we as a board achieved. I really encourage farmers to stay engaged, this is the strength of the co-op. A lot has been done but there is still a lot to do.”
Peter McBride is chairman and on behalf of the co-operative’s farmers, thanked Donna for her contribution.
“Donna has been a valued member of our board at a critical juncture for the co-op as we have overseen the reset of the co-op’s culture, long-term strategy, governance and risk settings, and our capital structure.”
At the time of the business reset it was incredibly challenging, and Donna reflects that, “It was a very necessary thing, a very cleansing thing, sometimes there is nothing like a crisis to create change. I remember thinking; ‘We are going out to talk to farmers with the worst financial results in Fonterra’s history, but as we were coming out with openness and transparency, farmers were very appreciative of this.’
“A big challenge of being on the Fonterra board is the enormity of the decisions and how it affects the livelihoods of 9500 farmers. I mean you just cannot please everyone. The decision to change to a flexible capital structure is the right decision but was highly impactful – we have affected our shareholders’ balance sheets with the strategy to improve them for the future.”
Donna lists examples of what she perceives is the value of a company. For example, with Primary ITO its assets are people and their ability to train and teach a curriculum. EastPack is a post-harvest provider in a highly competitive market, so they need to pack efficiently at a low cost and ensure any investment in automation and technology not only gives a return on investment but also looks after the grower’s fruit. That is how they create value.
“At Fonterra we have many competitive advantages:
- We are world leaders at efficiently producing whole milk powder through scale dryers that operate to the grass curve (ie: produce milk when the grass is there).
- Our scale allows us to produce the right product and to sell to the best customer as market dynamics change, an example of this was during the China Covid lockdown, we changed the product mix from food service to ingredients and maintained profit.
- We have over 150 years of investment in dairy innovation, and we are very good at meeting our customers needs with the right formulation.
- Our scale allows us to load whole ships, and this was useful during the Covid supply chain disruptions.
- NZ is the best place in the world to keep a cow – from a sustainability lens it will take investment to ensure we stay ahead.
Donna sees we can add value with our sustainability credentials and meet the demands of the most discerning consumer, and governors must ensure farmers get a premium for this.
“When I arrived on the board six years ago, sustainability was about fencing waterways and riparian planting. It is so much more today. Climate change has become a major focus for governments, producers and supply chains globally. The need for sustainable products is now customer led.”
Every business is considering how it can be more sustainable and farming is no different.
“I know it is unpalatable to many, but we only have to look to the Netherlands to see the demands being placed on Dutch farmers in the south to cut nitrous oxide and GHGs to understand the power of the consumer.”
Onfarm with Donna
Donna is chartered accountant for Corona Farms: the family owns two dairy farms in the North Island and two in the South, another two have been sold, one to each of the Smits’ sons as they work through a succession plan. They also have support blocks, kiwifruit orchards, a beef farm, and forestry.
Corona farms have never used a lot of nitrogen and it is easy to come in under the 190kg N/ha limit, particularly in the North Island, but also achievable on the South Island farms.
A way they looked at practising sustainability on the South Island farms was to switch from border dyke irrigation to pivots.
“In the early 2000s we thought borders were elegant as they didn’t use electricity, but we now know that they leach nitrogen and use a lot of water, so have undertaken a programme of capital development and now have all our farms under spray irrigation.”
Family time will be a priority after she steps down, as there hasn’t been much of that in the past, and Donna alludes to a couple of projects – as well as looking forward to being able to sleep – there was never much of that the night before a board meeting even though the board papers were always well presented and an interesting read.
