Ferrier's paycut a timely warning to other agricultural businesses

Well done Fonterra and well done Andrew Ferrier on taking a whopping great pay cut of $360 000 even if his salary is in the realms of fantasy at $3.62 million a year.

When you look at it on paper, three million seems a heck of a lot to pay the figurehead of an organisation, but converted to US dollars it's paltry compared to what he could get working elsewhere in the world, especially it seems, in a recession.

Have a read of this blog written by Rick Newman in the US regarding the trend upwards of CEO salaries in the States despite the gloomy economic conditions:

It's good to be CEO, even in a recession. Especially in a recession.
Hewlett-Packard's stock price fell 29 percent in 2008, and the company announced plans to lay off 25,000 workers after it acquired Electronic Data Systems. But CEO Mark Hurd didn't feel the pain. Hurd earned $43 million in 2008, a 73 percent raise from his 2007 pay. Perks included $136,000 worth of personal travel on corporate jets, paid for by shareholders, and $7,472 in travel expenses for Hurd's family, according to an analysis of HP's annual proxy filings by shareholder activist Eric Jackson. Several other top HP executives earning multimillion-dollar pay got double- or triple-digit raises.
[See 10 gaffes by doomed CEOs.]
Hurd has been a strong CEO since he took over in 2005, generally credited with enhancing HP's profitability after a period of drift. But the big pay hikes during a dismal year are generating some of the toughest criticism of Hurd's tenure. "There are some very troubling aspects about how he, his management team and his board approach executive compensation and governance," writes Jackson. "Investors should steer clear of this Silicon Valley icon until it gets its act together."
For all the talk of reining in CEO pay and enacting financial reform—even from some CEOs themselves—it's beginning to appear that very little has changed in the way companies are run and executives get paid. A new survey of CEO pay by research firm the Corporate Library finds that median take-home pay among more than 2,000 CEOs fell by 6.4 percent from 2007 to 2008, the first time on record that CEO pay has gone down instead of up. But that was in a year in which the stock market fell by 37 percent and the economy lost 2.6 million jobs. By almost every measure, the vast majority of companies performed far worse in 2008 than in 2007. "While the downturn has affected pay, the link between pay and performance remains weak," says the report. "Such a minimal decline in pay given the massive decline in shareholder value is hardly an adequate response."
A surprising number of CEOs didn't personally experience the downturn at all. Of 100 industries tracked by the Corporate Library, median CEO pay went up in 40. The 10 highest-paid CEOs included seven from the oil industry, which had a banner year as gasoline prices hit $4 per gallon. The others were Stephen Schwarzman of the Blackstone Group, Larry Ellison of Oracle, and Michael Jeffries of Abercrombie & Fitch. Schwarzman earned the most: $702 million. No. 10 Jeffries earned $72 million.
[See how to pay CEOs what they're worth.]
Reformers want to see much tougher rules linking executive pay to the long-term performance of their companies, and a few CEOs took a step in this direction. Lloyd Blankfein of Goldman Sachs endured a 97 percent pay cut in 2008, because the tony Wall Street firm rescinded bonuses for top executives. Jamie Dimon of JPMorgan Chase went without a bonus as well, resulting in a 92 percent pay cut. But both of those companies were big bailout recipients under the microscope of politicians and regulators. And both have paid back all their bailout money, which means Blankfein and Dimon will probably do a bit better in 2009.
[Get ready for the miraculous hollow economy!]
It's likely that overall CEO pay will bounce right back up in 2009 as well. Many CEOs earn a relatively low base salary, with the majority of their total compensation coming from bonuses, company stock, or options to buy stock. The plunge in the stock market last year means the value of CEO-owned stock fell as well, and many CEOs declined to exercise options to sell stock since prices were so low. That has changed in 2009, with the market up smartly. It could even turn out to be a record year for CEO pay raises, as they springboard off of last year's lows. At least somebodies getting ahead.

So good on Fonterra for insisting on a performance based salary. It's just a shame that some of our other agricultural companies are not using the same standard for their bosses and their board sitters...Farmgirl can think of one such fertiliser company that would and should be rife for a pay cut!

Farmers and Fonterra need to be tougher on those practising calf cruelty

Whether or not MAF finds there is a case to answer of calf cruelty on a Fonterra supplier's farm in the King Country, Fonterra must move quickly to get rid of any taint on their reputation.

The problem is not isolated. Farmgirl knows of a farm in the South Island that had been practising abhorrent standards for many years on a large scale, and had even lost thousands of calves due to neglect, ignorance and incredibly harsh, cruel conditions.

Not only does Fonterra have a need to act, but so does the farming industry in general. Hiding these cowboys when we all know what is going on and not speaking up for fear of retribution will only backfire in the long run.

For an industry to thrive on its wholesome image, it needs farmers to keep an eye out for mistreatment or any practices that could threaten their bottom line.

van der Heyden was right to call on authorities to mount a full scale inquiry into the Crafar farm but he needs to do more. Suspension (in this case there was video footage that he found alarming) as a supplier must happen if proven guilty and a check performed regularly by Fonterra to ensure they are treating their animals better.

Expanding too fast is not an excuse for poor treatment, nor is ignorance. Unfortunately it is not just the Crafars out there damaging the industry, and it's up too us all to stop it.

The worrying truth about Ravensdown's cashflow

An adviser thinks Farmgirl should be focusing on the fact there has been such a large cashflow deficit ($109 million) from Ravensdown 'operating activities' (i.e.core fertiliser activities) in the past year and that the current ratio (85.4%debt/assets) is in such bad shape.

"Paying a rebate with those numbers in such poor shape would seem risky, especially when you compare what Fonterra is doing (no unshared supply, no contract milkers, retaining a large portion of the payout). Fonterra seems to be taking a cautious/prudent approach that should see them through these difficult times."

Is Ravensdown doing the same?

Fonterra forecast extremely troubling for Government trying to go forward...

Well it couldn't have got worse for the Government, one day out from Bill English's carefully constructed first budget. Fonterra has announced a forecast payout for 2009/10 of $4.55, down from $5.10 per kg for this season.

This is serious, regardless of whether the final pay-out is lifted somewhat. Farmgirl understands that there are already many Canterbury dairy farmers on their knees and has been told that anything $5.00 or under could spell mortgagee sales for many that have expanded in previous seasons.

Retailers in agricultural servicing towns like Ashburton have been reporting a drop off in sales across the board, and this will have many retailers reeling. The affects will be large and long term.

The consumer/producer divide Farmgirl has been blogging on over the past few months is about to be narrowed considerably as the general public begins to understand that dairy farmer fortunes are their own fortunes as well.