The AGC debacle was a suitable point in CBH's recent life that indicates a few Pandora's boxes may need opening. Indeed that's what CBH's loudest critics claim to want, crack things open and let out a lot. Likewise the CBH Board has a small set of harsh and loud critics too, they too want things cracked open.
Some of course are high in noise volume, low in ground support and their lack of support seems to match their lack of understanding on some of the finer points. Some, driven by economic ideology, by personal advancement, founding father syndrome or just zeal for the short sighted prize in the dash for the quick cash stakes are all a threat to the CBH group.
The other side of the coin is equally interesting, some of the Co-Operative's staunchest stalwarts have an understanding of many of the Co-Op principles whilst others have only a very basic understanding of the ins & outs of such a corporate structure. So in the front bar after the weekend footy, down the bowling club or over the fence, its difficult for some to defend CBH when much of it isn't known or properly understood.
Not so much what CBH is, but what this type of corporate structure is and is capable of delivering.
It will sound unkind, but there are some members who are flat out managing their own day to day farming operations, overseeing their own immediate financial futures that they genuinely haven't got time to sit the Australian Institute of Company Directors flagship course. For some, CBH has been there so long its part of the furniture. Its just an "always been" and some of the younger generation really haven't worried about looking at it too much. Phrased in potentially offensive-to-some language, there are many members who are either less than sophisticated shareholders or just too damn busy to be involved in CBH matters beyond each harvest.
Its a critical flash point that was exploited, albeit poorly, by AGC. Some of their "directors" either had a poor understanding of how the structure works and the actual proper process required to achieve what it is they wanted to achieve.
For the AGC strategy to be fulfilled they need only follow due process and with the required amount of support it is done. However they did not do this. Indeed the proper process is to either lodge a motion at an AGM or Special Meeting. To do that they need the required number of voters to vote in favour of corporatisation.
They never ever did this, never even tried.
Instead they followed a different path and accused the board, in public in several media platforms that the members were being denied their right to assess and decide on the proposal themselves.
I think the board missed a valuable opportunity to gently with little effort to push the AGC house of cards over during the first onslaught.
AGC's claim was potentially inferring the directors had breached their fiduciary duty, or as the AICD's flagship course tells you...failed the reasonable person test. Now if this is the case the entire board could be swept out in one foul swoop with each of them being personally, financially liable under the Corporations Act.
Due process is due process and the board was falsely being labelled incompetent and/or corrupt and/or breaching their fiduciary duty & the Corporations Act. Here's the fact, its not that there was a denial of a claimed right, that right didn't even exist in the first place. This horrible wrong was never properly squashed and continued to gather momentum.
Originally the offer should have been received by the board and immediately a reply issued that includes an outline of the proper due process the board & the co-operative must take before any change of corporate structure can entertained.
Again this didn't happen and although AGC failed to gather enough support to get it through, it did gather some support, ill-informed as it was.
What made it worse was another opportunity to properly deal with it was missed because before the board had time to consider it, long before the set final acceptance date, AGC went on the attack about members having rights denied and a number of other comments. They drew an adversarial line in the sand and decide not to pursue a unifying result, but rather draw up battle plans to conquer by verbal force. It was not at all in the members best interests.
The offer would have cost an enormous amount of money to consider not just in large legal fees but also in lost time & productivity from key senior staff who then had to turn some of their attention away from day to day work.
I think the board missed the opportunity to remain proper process driven which would have then placed the onus onto AGC to tick all the boxes before the board wasted any valuable time, money and effort on the proposal.
There is another important angle. There's been a perceived lack of connection between the board & the members (by some). The board & management have put a lot of effort into member engagement with many meetings with grower/members in the various districts. This is good.
This has to continue but it has to include what due process is, what a board's role is and what the director's rights and responsibilities are so lay members have a better understanding of when their board is on song, on the right page, in the proper hymn sheet.
If these gaps of understanding are not filled, a return debacle isn't far away. If AGC are aware of how embarrassing it was watching their bizarre efforts from the outside you can be guaranteed they will approach this again with similar vigour and perhaps for the first time with matching rigour. If the members are ill informed, some will possibly be making a decision they may later regret.
The board's role is to make decisions such as the suitability of any offer if its in the best interests of the members or not. I believe this was their intent, but they focused on the offer due to pressure and missed the chance to stick to due process. Is it a mistake? Possibly it was, but the outcome was what it was.
From the outside the offer had many other faults and when one of AGC's "directors" called it a "Wesfarmers moment" it really confirmed that it would, in the longer term, not be in the best interests of grower/members. Wesfarmers is a publicly listed company that delivered a huge nest egg to well positioned people and certainly not all members. Its now no longer involved in Agriculture apart from CSBP. Its a Coal/Hardware/Gas investment conglomerate. Therein in possibly lies the motivation of some other folk aligned with AGC.
Strategy is an interesting thing, at times complex, at times very simple.
Strategic Thinking is the board's domain...not management.
Strategic Planning is management's domain...not the board's
Strategic Direction is something the board, the management & the members should all be across. Due process, is also everyone's concern. Communication from the board/management to the members is not at all woeful, the engagement (looking from the outside) is far better than many listed companies.
Its some of the content that may need addressing. Member education on process, legal liability, director's rights, roles & responsibilities, managements role & limitations and what fiduciary duty actually means.
A recent letter to the editor in the Farm Weekly makes my point very well. It shows one member not very well informed, displaying less than adequate understanding of the basics of corporate governance, the company structure and the underpinnings of a good board and its performance. Putting more "young people" in solves no problem, real or imagined.
You need good, well trained, directors who know their rights, roles and responsibilities, the corporate structure they're working in, their over arching strategic direction, their fiduciary duties and that failing to exercise their rights is a failure in the responsibilities. They need to be able to communicate all these things simply and well so the clear majority of members aren't tricked into falsely believing they're being denied a right that doesn't exist. And doesn't exist for good reason and that the board's actions actually pass the reasonable person's test.
The average farmer isn't sophisticated nor unsophisticated, they've not naturally board/director trained, not conversant in Corporations Act. The membership doesn't need to sit the AICD course, but the board needs to get a lot of board basics out to the members regularly in a learning forum so members understanding of the board, the directors, the corporate governance line and due process so its gradually better understood.
Ironically some people who could be labelled as being part of Agriculture's self proclaimed ruling class elite helped attack the board by inferring it was untrained and/or in breach of the rules as the board was some kind of pig headed self proclaimed ruling class elite.
The board is not perfect. Perhaps some facets of its strategy are not perfect, but if the process is correct and widely known and understood it can be better adhered to and the board's performance better understood & appreciated.
Then silly offers & letters from zealots will be dismissed and rejected by the majority of members as soon as the board rejects them. Yep, I have written a number of letters to the Farm Weekly defending CBH & the board, more on social media to respectfully correct common misconceptions about CBH, the board, strategy and structure. Apart from the odd anti-cooperative zealot most are stunned to learn things they didn't know, realise or understand. More than half of them drew enough comfort to private message me their thanks. 2 from the northern wheat belt went so far as to track down my phone number & ring me. I'm probably not writing letters to the editor anymore on CBH & I hope the board get across the issue of shareholder engagement & education.
So is this a critical attack on the board, management or the members?
No, none of the above. This is a not-uncommon scenario that plays out in many board rooms.
Once the board, management and the members/shareholders all have a better understanding of due process & who does what, the easier it is for all to get on with their respective roles, waste less time & money on side tracking. Everyone can share the strategic direction that the organisation holds dear.
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