Fonterra has failed us all

The most worrying aspect of Fonterra’s poisoned milk scandal is the poor media reporting and shallow commentary which sees the company simply as a victim of secretive Chinese officials who covered-up the poisoning of children by milk powder from Fonterra’s 43 per cent owned San Lu company. The company is getting away with murder.

Speaking for the first time last week, Fonterra Chairman Henry van der Heyden, said the company board fully backed their managements handling of the crisis.

“We are absolutely comfortable with the actions that our management took. Our focus was on getting it (the affected product) out of the supply chain as quickly as possible.”

If only this had been the company’s focus. But it wasn’t.

Fonterra has been criticised instead for lacking understanding of the cultural context in which it was doing business and so has become badly burnt when its best efforts were overrun by local officials wanting to protect China’s food-safety reputation, more so because the Olympic Games were about to begin.

It’s true the company should have understood the environment in which it was operating and should have been wide awake to early reports in the local media of children becoming ill from milk powder. How could the company overlook a Chinese television programme on the problem which used San Lus products to illustrate the story? And with the widely reported lacing of Chinese pet food with melamine last year, leading to pet deaths in the United States, it would surely be common sense to check supplies of milk coming into the local factory.

In fact it appears from media reports that the San Lu dairy operation was aware of melamine added to its milk supply as early as three years ago. Then from March this year the company received calls from worried parents about their children becoming sick from their infant formula. This should have rung alarm bells immediately.

Fonterra can be criticised for many failings leading to the crisis but the most important criticism must be that the company stayed publicly silent for five long weeks after it became aware of the unfolding disaster.

Once the Fonterra directors on the San Lu board were told of melamine in its products on August 2 the company initially did the right thing. It informed local Chinese officials and advocated an immediate public recall of the poisoned products. When it became apparent this would not occur the Fonterra senior management then had the moral responsibility to act unilaterally. They didn’t.

Fonterra chief executive Andrew Ferrier says the company thought it better to work with local Chinese authorities for an effective recall of products rather than risk less effective action by the company attempting its own recall. This argument doesn’t hold water.

The company instead stayed silent despite knowing that poisoned products its local company had manufactured were still being bought by Chinese families and fed to infants, causing death, kidney disease and serious illness to thousands of Chinese children. In other circumstances there would be an investigation into manslaughter charges against Fonterra and San Lu officials.

If Fonterra had released a public statement in New Zealand in early August it would have broken the story in China and forced an immediate public recall of the poisoned products. It would also have caused serious embarrassment for Chinese officials with the Olympic Games about to begin and damaged Fonterra’s plans to expand in China. But it would have been the right thing to do.

There is no question here of using the benefit of hindsight to attack the silent hand wringing of Andrew Ferrier. Fonterra is owned by New Zealand dairy farmers and I can’t believe there is a single one of them who, knowing the facts which were known to Fonterra’s senior executives on August 2, would not have endorsed an immediate public statement by the company to force the recall of all San Lus poisoned milk powder.

If our dairy industry were still controlled by working farmers this disaster would not have unfolded as it has. Only the growing number of Queen Street farmers would go along with Fonterra’s silence knowing there would likely be greater financial cost in speaking out earlier.

The group of Fonterra executives responsible for this cowardly silence while babies suffered and died is the same group trying to move Fonterra from a company based on the co-operative model to a fully-privatised, money-driven model. Under their agenda, working farmers would become mere shareholders while control shifts rapidly to wealthy stock-market players who are as far from the land as Fonterra’s senior officials are from a basic understanding of ethical behaviour. Fonterra’s shameful silence has failed us all.