There’s an old saying that there are really only two types of fear: fear of success or fear of failure. Which do you think applies to Fonterra?

I suspect it’s much more of the former than the later.

There’s something in the Kiwi DNA that means when it comes to business we seem reluctant to take risks and to push ourselves forward. I’ve never really understood why that is given our track record of achievement in a range of endeavours.

We like things to stay just as they are, just as they have been and just as we hope they always will be. Change is not something we readily embrace.

It probably has a lot to do with our conservative, Presbyterian upbringing.

Fonterra’s latest attempt to restructure its capital position was about as conservative as it gets.

No sharemarket listing, no outside capital being introduced and no opportunity for Mum & Dad investors to be involved.

Yes, the revised proposal met the broad objective of providing a mechanism for the co-op’s capital to be increased, but it lacked vision, foresight or any attempt to demonstrate this was a global corporation that's serious about its future.

The other global players in the dairy sector Nestle, Danone etc must be breathing a sigh of relief. They have little to worry about in competitive terms as a result of this latest offering.

What all this perhaps demonstrates is a somewhat dysfunctional relationship between its farmer shareholders and the board and management of Fonterra. It really comes down to a matter of trust – or a lack of it.

Given the shambolic handling of the first attempt at a capital restructure, is it any wonder?

What company would propose a radical shakeup of its balance sheet without at the very least first getting a feel from its shareholders as to its acceptability and then be forced to endure a humiliating back down when it gets comprehensively rejected?

More to the point, can you think of any major company in recent times that’s had such a significant proposal voted down by its shareholders before it was even put to the vote?

And yet that’s exactly what Fonterra effectively did. It launched a proposal to list a portion of the co-op, including folding the co-op’s production assets into a new entity and completely spooked farmers as a result.

Now it’s paying the price. Fonterra’s Board really only have themselves to blame for the position they find themselves in. They sought to move too far, too fast from the outset and this latest proposal is a compromise. Farmers are naturally wary; particularly post San Lu, and who can blame them.

But what also emerges from all of this is how much the communication process has had to improve between farmers and the Board. It was badly damaged due to the lack of consultation with the first proposal and remains ‘fragile’ at best.

This second proposal offers the farmers the chance to increase their shareholding by 20 percent but avoids the introduction of any capital from outside the co-op.

So effectively, all that’s really happening here is that Fonterra’s existing debt is being pushed on to its farmer shareholders.

And while farmers have accepted a certain willingness for this to occur, is this really in everyone’s best interests; particularly given the extent of the country’s – and farmers - current indebtedness?

But is it intentional that this latest proposal looks more like a transitional arrangement than a long-term plan?

The problem here is time – something Fonterra doesn’t have a lot of right now as its current capital issues move closer to a crunch point. It took six years to create the co-op in 2001. It’s now taken another eight years to address the deficiencies of the existing capital arrangements - assuming this latest proposal gets over the line - and now it’s likely that in another five years the whole issue of capital is going to have to be debated once again.

What also has to be of concern is that Fonterra appears to have done little in the way of either research or modelling to understand the availability of the capital they’re actually seeking. Chairman Sir Henry van der Heyden admitted as much at the launch of the revised proposal. So Fonterra really has no idea how much to expect in the way of additional capital.

Yes, farmers have said they want to retain 100 percent control and they’re willing to provide the necessary capital, so they say, but for the vast majority that decision will not be made by them – it will, in fact, be decided by their banks.

Given Reserve Bank Governor Dr Alan Bollard has already reminded the banks of the need to maintain caution in terms of their rural lending; he’s unlikely to be greeting this latest offering with wild applause.

The idea that Fonterra’s farmers should be able to trade shares amongst themselves, rather than via the existing redemption arrangements, makes sense. However, given that farmers who are in a position to do so will, from the outset, increase their shareholding to the maximum allowable level and those who are not in a financial position to do so will opt out, you have to wonder how much trading will actually occur - given the restricted nature of the market.

But having to wait another year for the trading platform to be created is one aspect of this latest proposal that should be fast tracked once a vote is secured on steps one and two.

Consideration should also be given to broadening the pool of Directors on Fonterra’s Board. An infusion of expertise in areas outside of farming such as global marketing, research and development and strategic planning would clearly be beneficial at this time.

This restructure was an opportunity for Fonterra to demonstrate boldness and a vision for its future. It was also the perfect chance to include New Zealanders, if only in a small way, in that future.

Why couldn’t a small portion of the shares have been made available to New Zealand residents; if only to add to the NZX’s depleted listings board? But more importantly, it would allow Mum and Dad investors to feel part of Fonterra’s growth. What a perfect marketing opportunity for the co-op that has now been missed.

Kiwis are all too frequently reminded by farmers that they’re the backbone of the country. Here was a golden opportunity to unite town and country with a common purpose.

Farmers though have to seriously question the reason for their risk aversion with this plan. By constraining the Board and management the way they have they are potentially setting themselves up for more problems further down the track. However, at the same time, it sends a very public signal as to their lack of confidence in New Zealand’s capital markets and their lack of trust in Fonterra to be able to successfully execute its plans for global expansion.

There also seems to be little recognition of the fact that global capital markets have changed dramatically and debt is now very much out of favour. With long term interest rates set to rise in the near term, many farmers are setting themselves up for a nasty fall by wanting to expand their risk profile in this way.

For too long Fonterra has remained in the background of the New Zealand psyche; unless you happen to be a dairy farmer. You have to wonder what it will take for the co-op to front up to the fact that this proposal significantly under rates and under values its potential and may well in the future come to be dubbed “Fonterra Lite.”