Atihau Whanganui Incorporation was established in 1970, following the formation of the vested lands in 1966. The Incorporation has approximately 6500 shareholders. It has similar shareholders to Morikaunui Incorporation which was incorporated in 1953. Morikaunui Incorporation has 4000 shareholders. There is a possibility that these two Incorporations will be amalgamated in the future, but for this case study Atihau Whanganui Incorporation was chosen as it is the larger.
The core business activity of the Incorporation is sheep and beef farming. The Incorporation farms eight stations. It has interests in forestry (2000 ha) and has made some small investments in property. The Incorporation's total landholding is 40,874 ha. The social, educational and cultural activities are managed under a Charitable Trust called Whanganui Trust. This Trust also services Morikaunui Incorporation.
The Incorporation has no subsidiaries but has joint ventures in forestry. It has a lease arrangement with Winstone Pulp International Ltd where Winstone Pulp International Ltd manages the whole contract and pays stumpage. The lease is for 99 years giving the Incorporation three crops during this period – the trees were planted 26 years ago in 1978. The Incorporation has another joint venture with their lessees. This is a 50/50 arrangement whereby the block is farmed by the lessee but the trees are planted on a 50/50 basis which the Incorporation contributing 50% towards the costs.
The Incorporation has seven members on its Committee of Management. Under the Committee of Management is the general manager who has been employed since April 2003. As a result of the restructuring process the Incorporation established three subcommittees. These are the farm committee, which has a farm manager, the forestry committee that needs limited management input because of the arrangement with joint venture partners, and the financial committee which also includes general administration. The financial and administration services are contracted out.
In a move towards regaining autonomy the Incorporation wants to eventually have the administration services provided by the Incorporation. Across all its business interests the Incorporation employs approximately 35-40 staff.
The Incorporation's first strategic plan was created in 1995. This plan was developed by a mix of shareholders and members from the Committee of Management. The Incorporation has recently reviewed this strategic plan. This time specialists were engaged and the Committee of Management attended workshops. The Incorporation envisages that the strategic plan will now be reviewed every five years. The farms, however, do have a three year strategic plan.
Although the Incorporation has never had a formal business plan prepared annually, the Incorporation since its inception has been guided by the policy of resumption and retention of its lands. In 1970 the Incorporation had 101,000 acres, and since then a further 26,841 acres have been resumed. Specifically speaking the Incorporation wants to resume all leases that expire in June 2005. This amounts to 28,915 acres.
The Incorporation's financial year runs from July to June. The AGM is not till late November – December as it takes about three months for the Incorporation to settle accounts and to have them audited after the end of the financial year.
All farm budgets are reviewed six monthly. The budgets are reviewed twice a year because of the nature of the operation. Reviewing the budgets in July allows the Incorporation to better estimate what the commodity prices will be like in December so that in January the Incorporation can 'tweak' the budget accordingly. The forestry budgets are prepared once a year during February.
In the past the Incorporation did not prepare annual business plans. However, the general manager as part of his position is to develop an annual plan for the Incorporation. The standard process of having the plan go to the Committee of Management for approval will apply.
The Incorporation has not made any investments in recent years. Its portfolio consists of investments that are arguably past their 'used by date' as they were made 10-12 years ago and are not making any returns. Although the Incorporation does not have a due diligence policy, it undertakes due diligence methods for all investment decisions. The Incorporation has an informal process whereby the preliminary financial analysis is put before the Committee. It then approves a due diligence process to be undertaken.
The Incorporation has various risk management policies. Each farm station has a health and safety plan. The Incorporation encourages employees to up-skill themselves in all facets of their work on the farm. The Incorporation also has a comprehensive insurance policy and payment system. Although it does not have an investment policy, its approach is very much a conservative one.
The Incorporation does not have a conflict of interest register and conflicts of interests rarely occur. However, trustees must declare any conflicts of interest. If a conflict of interest arises the trustees can participate in discussion but cannot vote on the decision. For educational grants, trustees with a conflict of interest withdraw themselves entirely from the decision making process.
The major change the Incorporation has experienced since its inception has been the separation between governance and management in 2000. Prior to 2000 the Trust only had a station manager. The Trust now has a general manager who handles all management issues.
Some of the milestones for the Trust are:
The Incorporation benchmarks itself against industry practices. It strives to be better than average. In 2003 it entered the Mäori Farmer of the Year Awards, where it was able to access information and to network with people in the industry. This exercise proved beneficial, showing the Incorporation where it needed to improve in its practices.
The Incorporation only reports to the shareholders at the AGM.However, the shareholders have access to all financial accounts and station data at any time. The Incorporation's website has recently gone 'live' and the Incorporation believes this is another way of being transparent to shareholders.
The Incorporation's economic performance is measured through the standard financial reporting mechanisms. There are various initiatives that the Incorporation can report against for social, cultural and environmental performance.
The Incorporation offers education and sporting grants and also gives grants for marae development. On the farm the Incorporation endeavours to use environmentally friendly practices and operates on the philosophy of 'putting back what they take out'. The Incorporation has also made an effort to protect native bush on the land by fencing off areas and has a process in place to protect waterways.
Last year the Incorporation had its first Board performance review. This process is to be conducted annually. As part of the review each committee member did a self-analysis exercise. Most committee members see themselves as representing the whänau as opposed to being there in an individual capacity. Therefore, undertaking a self-analysis exercise was something new for them.
The Incorporation engages with shareholders through the AGM and the website. The general manager engages with stakeholders on most issues. All national issues are reported back to the Board. The number of issues arising in recent years meant that there needed to be more interaction between the Committee of Management and the general manager. Meetings are now held monthly rather than quarterly to ensure ease of reporting between them.
The election process is undertaken on a three year staggered rotational basis. Nominations are received prior to the AGM. All candidates' profiles are sent out to shareholders before the AGM. Candidates also present themselves at the AGM.
The Incorporation's Committee members have done a number of things to better understand their role as governors. Since 2000 they have undertaken several governance workshops and attended the Institute of Directors course. The appointment of a general manager in 2003 illustrates that the Incorporation recognises the difference between governance and management. It was also another step for the Incorporation towards achieving autonomy, which has meant that less reliance is placed on the role of the accountant. The managers have authority to spend according to their budgets. However, all capital expenditure must go back to the Board for approval. Any expenditure outside the budget also goes back to the Board through the general manager.
Prior to 2000, farm managers operated on an individual basis and reported monthly to a supervisor who was usually a member of the Committee of Management. Now managers are responsible directly to the general manager and report monthly. The general manager is also required to table a progress report at each monthly meeting.
The general manager is responsible for managing conflict at the management and operational level. A mediator is used if conflicts of interests arise between the general manager and a Board member. The Incorporation's employment policy is to employ the best person for the job. The general manager's performance is reviewed annually and has a contract based on key performance indicators. Management performance for farm managers is reviewed annually. However, new employees are reviewed after the first six months.
The general manager (a former Committee member) believes that seven members on the Committee of Management is an optimum number. The Incorporation does not have a formal governors training policy, but training is provided on an 'as needed basis'. The training is usually done as a collective through workshops and courses, although the Incorporation does support individual development.
Last modified: 2/06/2011
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