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Abstract
The New Zealand dairy cooperative Fonterra is one of the largest in the world.
In 2007, its Board presented a capital restructuring proposal with the aim of
reducing the equity redemption risk, solving members’ portfolio problems, and
acquiring capital for the cooperative. The proposal indicated that external owners
would be allowed, but that members would own most of the stock. The
shareholders rejected the proposal. This analysis of why the proposal failed shows
that two specific characteristics of Fonterra were primarily responsible: The
shareholders considered the Fair Value Share to be instrumental in securing full
member control and the Shareholders’ Council effectively channeled members’
opinions.