IDB plan would give shares to farmers

By Paul Mooney

A proposal has been drawn up for the board of the Irish Dairy Board under which dairy farmers would receive voting shares in return for the monthly levies they pay into the profitable marketing co-op.

The aim is to give milk suppliers more direct control over the future of the IDB, which is owned by the country's dairy co-ops. But the shares would not receive a dividend or give farmers a stake in the value of the IDB.

A meeting of the IDB board on Tuesday debated the plan which has been put together by its Investment Sub-committee over the past 12 months. No decision to accept or reject the proposal was reached - instead it was referred back to the sub-committee for clarification on a number of issues.

The plan is aimed at preventing any move by dairy co-ops to break up or sell the hugely valuable IDB against the wishes of active milk suppliers. Some of the co-op owners of the IDB have more dry shareholders than milk producing shareholders. The net book value of the IDB is over €300 million. The future of the marketing co-op has been the subject of discussion for the past 18 months.

Under the proposal the shareholding allocated to active dairy farmers would allow them vote on any Special Resolutions on the future of the IDB. This would operate on a one shareholder one vote basis. On ceasing milk production a farmer would lose voting rights but would be eligible to return the shares and get repayment at par value. This would keep control in the hands of active milk suppliers.

The plan specifies the majorities that would be needed for approval of various Special Resolutions. A change of name, an amalgamation with another society or company, or transfer arrangements, would require 75% support at one meeting of milk supplier shareholders or 50% support at two meetings.

However, any move to convert the IDB co-op into a company or to voluntarily dissolve it would require a 75% support at a first meeting followed by a 50% support at a second meeting.

At Tuesday's meeting, the sub-committee members pointed out that the limiting of the value of the new shares to par value, ie the price paid for them, as well as the repayment of shares to farmers quitting milk would avoid giving any incentive to farmer shareholders to sell or break up the IDB.

A number of additional safeguards are proposed:

• Calling of a general meeting would require backing of 50% of milk processing shareholders or 10% of farmer shareholders of which not more than 30% would be suppliers of one dairy co-op.

• Any special resolution would have to be approved separately by dairy co-op shareholders and by farmer shareholders.

A number of concerns were raised by other board members at this week's meeting including the cost of administering the new share scheme. The sub-committee is to examine this and other issues and its plan will be discussed again at the next IDB board meeting.

One of the main drivers of this issue has been ICMSA president Pat O'Rourke who sits on the IDB board. This week he said that it was unacceptable that dairy farmers have paid €150 million into the IDB by way of levies but do not have any shares in the co-op or control over it.

The sub-committee consists of Michael Cronin, IDB chairman; Michael Murphy, IFA dairy chairman; John Walsh, Dairygold chairman; Carbery's Dan Joe O'Donovan and ICOS' Paddy O'Brien.