Armstrong on handling of Fonterra fiasco

August 7th, 2013 at 6:46 am by David Farrar

writes at NZ Herald:

Unlike its management of some ongoing and by comparison trivial matters of state – such as the accessing of Peter Dunne’s emails – the Government’s handling of the infant formula contamination scare is difficult to fault … so far.

That assessment may yet change when the various official inquiries start examining the regulatory role of the Ministry of Primary Industries in the dairy industry.

For now, however, John Key, Tim Groser, Steven Joyce and other Cabinet ministers have provided a textbook example of how to handle a crisis. Their competence has been further highlighted by Fonterra’s gaffes and atrocious public relations.

The Government immediately realised the gravity of the situation, identifying the priorities for action and showing no compunction about exercising what in other circumstances might be deemed heavy-handed intervention.

When even Labour is saying they have no criticism of the Government’s actions to date, you know they have handled it pretty well. Considering how many portfolios and Ministers are involved – food safety, primary industries, health, trade etc, that is no mean feat. The biggest challenge is often just making sure it is clear who is in charge, what needs to be done, who is doing it, and everyone speaks consistently.

When election day rolls around in November next year, National’s ability to win enough seats to stay in power will hinge on voters’ impressions of how it has handled the things that matter to the average punter – things like preserving our dairy export markets. Not Dunne’s emails.

I don’t think one wants to politicise things at this stage, but it is a fair point that (in my opinion) on the really big stuff like responding to the Global Financial Crisis, the Pike River tragedy, the Christchurch earthquakes and now this – the Government performs as the public expect and want them to – one reasons why almost five years on, National still polls just below 50%.

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38 Responses to “Armstrong on handling of Fonterra fiasco”

  1. duggledog (1,111 comments) says:

    ‘When election day rolls around in November next year, National’s ability to win enough seats to stay in power will hinge on voters’ impressions of how it has handled the things that matter to the average punter – things like preserving our dairy export markets’

    I don’t think the average punter even knows how important the dairy industry is to NZ. They’ll bloody well know if it goes tits up with this clusterf*** and another drought.

    The average punter is concerned with how much petrol costs, whether their job is secure and pays enough, interest rates are affordable and that’s about it. Oh yeah and violent crime committed by baboons as evidenced on a regular basis

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  2. Pete George (21,806 comments) says:

    When even Labour is saying they have no criticism of the Government’s actions to date, you know they have handled it pretty well.

    Not just that the Government has handled it pretty well – some wise heads in Labour have seen how critical this is for the country and have prevailed over the normal knee jerk politicking that has prevailed in the party.

    Good on them.

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  3. Viking2 (10,713 comments) says:

    don’t we start to get the feeling that all this is payback for the Crafar farms cluster fuck. We have variuos chinese newspapers etc making alsorts of outrageous claims and threats. chinsa is about as dirty and grubby as you can get.
    Two nights ago on the news there was a reporter in Bejing with the scyscappers somewhere in the smaog in the background. That smog fucks more chinese babies than any milk scare would ever do.

    It’s Fonterra’s opposition making hay while the smog gets thicker and thicker and the chinese health authorities ignore the elephants in their own rooms.

    time to return and attack instead of lying down wimpering taking shit from faceless individuals.
    Individuals who would be taken out and SHOT by their govt. if they were considered by a group of nasties to be in anyway respoonsible. Just like they did at Sanlu.

    Now in kiwiland we don’t shoot responsible people, well we didn’t last time I looked., Perhaps we should drag that Crafar farms chinese tart out in front of a wall and raised the rifles.

    fuck what a beat up.

    OPh and where else are they gunna get 3 billion dollars worth of diary products to feed those they can’t feed now.
    Fucking idiots. Why do our poilies play thier stupid b;loody games. STFU

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  4. Viking2 (10,713 comments) says:

    And by the way Fonterra recalled product because they feared that that product MAY be contaminated, not that it was.

    FFS lets get some logic and reality into this and stop all the drama queens and competition leading the news.
    That’s what the polies should be doing and the NZ news media.

    Do we expect that to happen.

    No, no photo oppourtunites and no leading the news with their faces.

    No wonder I don’t watch the news.

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  5. stigie (628 comments) says:

    I don’t think one wants to politicise things at this stage, but it is a fair point that (in my opinion) on the really big stuff like responding to the Global Financial Crisis, the Pike River tragedy, the Christchurch earthquakes and now this – the Government performs as the public expect and want them to – one reasons why almost five years on, National still polls just below 50%.

    National , John Key and ministers have performed extremely well with all this tragedy unlike the 9 years
    under Helen Clarke, i think she had a free ride with paintergate,speedgate etc !!

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  6. kowtow (6,701 comments) says:

    And what of the media’s handling of this relatively trivial incident?

    This has been hyped out of all proportion to what has actually (nothing so far) happened.

    We all know that the media has its own agenda.I wonder what ours’ is?They are positively enjoying this.The Chinese comrades whom we were so eager to get into the world of free trade don’t seem to be so grateful these days.
    Our bods seem to want to hang out big business and the Nats……no surprises there.

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  7. RRM (8,988 comments) says:

    Yes.

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  8. Cunningham (746 comments) says:

    “When even Labour is saying they have no criticism of the Government’s actions to date, you know they have handled it pretty well” I think you are giving Labour a bit too much credit. They complain REGARDLESS of whether anything is handled well. Their judgement is appalling and one of the reasons they cannot get higher then the early thirties in the polls.

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  9. Pete George (21,806 comments) says:

    David Shearer in Parliament yesterday:

    DAVID SHEARER (Leader of the Opposition): Our priority today and over the next few days is making sure that parents here and abroad have the accurate information they need to ensure that their children are safe. As a parent I understand how anxious they might be feeling. They are confused and worried about whether there is a risk to the health of their kids. Their questions must be answered in full. They must have access to accurate and timely advice, and nothing must be held back from them. The safety of our children and children abroad is paramount.

    We are standing alongside the Government as it works with Fonterra to provide answers for parents.

    We will also support its efforts to protect our export markets and the international reputation that we have from further damage. When the time is right we will also be demanding answers, as many New Zealanders will be.

    This issue is bigger than politics, but Fonterra is not bigger than Parliament. It is up to us in this House to come together and make sure that everything that happens from this moment on happens in the best interests of parents and of our country.

    The best response I’ve heard from Shearer, sensible, responsible.

    And more from Key, Norman, Peters:
    http://www.parliament.nz/en-nz/pb/debates/debates/drafts/50HansY_20130806/draft-transcript-tuesday-06-august-2013

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  10. smttc (638 comments) says:

    David Shearer thinks Fonterra has a systemic and cultural problem with food safety. He knows this because he just told Simon Mercep on Moaning Report that he had “heard” as much. God help us if this idiot ever become PM.

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  11. tvb (3,939 comments) says:

    But the GCSB scandal has been handled poorly. I get the impression that John Key does not take his statutory responsibilities seriously.

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  12. Albert_Ross (172 comments) says:

    kowtow, you touch on a point which is beginning to worry me quite a lot. It is in everybody’s interest that the Government makes a good job of running the country – and yet the media seem to think they have not only a right but a duty to make that job as difficult as possible.

    Now surely there is a borderline between letting the public know what politicians are up to on the one hand, and actively seeking to sabotage the Government’s ability to use the power that it was elected to and to take the decisions that it was elected to make? and yet we see no sign of media awareness of that, or understanding of their own culpability if the Government is rendered unable to act, has its international credibility undermined or makes mistakes because of media action.

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  13. Cunningham (746 comments) says:

    smttc (470) David Shearer thinks many things, most of them irrelevant and/or complete and utter bullshit!

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  14. swan (651 comments) says:

    I do think Groser and Joyce appear to be doing a good job. But all this about Fonterra’s gaffes – what? Its Fonterra that enacted and coordinated the recall. They appear to be very close to having completed the recall – that is no doubt a massive undertaking. So their managers haven’t been media trained and dont come across all upbeat and mana-ful. Who cares? The overnight auction went off without a hitch.

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  15. Nookin (2,887 comments) says:

    “I get the impression that John Key does not take his statutory responsibilities seriously.”
    Really? Specifically which statute, which responsibility?

    Kitteridge says that we need the powers more than ever. Clark says that we need the powers more than ever. They have both been inside the workings of GCSB — Clark intimately so. They are aware of specific justification for the powers.

    Isn’t it arguable that Key’s refusal to disclose specific details — to his own disadvantage — indicates that he has greater respect for the statutory obligation of confidence?

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  16. Griff (6,263 comments) says:

    Storm in a tea cup .
    as I understand.
    1 Pipes were not cleaned.
    2 No contaminant was found in subsequent product testing.
    3 Third party finds problem in their product.
    4 Communist regime using circumstantial evidence of third party as leverage to distract from its own atrocious record in food product safety.
    5 NZ press using it to attack big business and government.

    I spent a decade as a factory supervisor of processes very similar to that used in the dairy industry.
    In that time the only recall we had was from a Chinese manufactured contaminated consumable.

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  17. hj (5,692 comments) says:

    There’s a “China expert” on Nine to Noon talking about Fonterra and the Govt giving an apology etc, etc. I think it should be handled line an airline crash where the whole process is gone over with a fine tooth comb and people can see what was wrong and what is fixed. People don’t need convincing that Fonterra didn’t do it for fun or profit (unlike melamine).

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  18. scrubone (2,971 comments) says:

    What PG said.

    The opposition response to these things is too often fact-free, devoid of any actual connection to the actual problem.

    Labour have simply decided to put the country first. For once.

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  19. scrubone (2,971 comments) says:

    But the GCSB scandal has been handled poorly.

    Agreed, how many people still think that the 80 cases were illegal based on an initial report, when a more detailed examination found they were actually legal? That initial report should never have been published.

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  20. Ross12 (927 comments) says:

    Griff
    Fair enough summary. I’m not sure on this dirty pipe bit. Bugs do not grow and multiply in a dry environment ( ie. powder). So we go from an its all clear in May 2012 to there is a problem in March 2013. Is it possible there was some contamination in the third party plant/lab ( in Australia I believe). I don’t want to get into conspiracies but from a technical view point it does not seem right to me.
    Having said that I don’t thinking testing for Clos. Bot ( or any other clos. strain) would be a routine test post production test (ie. not done in May 2012).

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  21. UglyTruth (3,030 comments) says:

    100% pure corrupt new zealand

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  22. berend (1,600 comments) says:

    You know what scares me the most?

    DPF: Considering how many portfolios and Ministers are involved

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  23. Nookin (2,887 comments) says:

    Scrubone

    I don’t think that the initial report said that they were illegal. Only MSM drew that conclusion. Kitteridge simply says that the law is messy and it is not clear that the surveillance was legal.

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  24. Cunningham (746 comments) says:

    UglyTruth (1,368) thanks for your extremely well thought through contribution to the debate.

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  25. swan (651 comments) says:

    Nookin and Scrubone is that right? I consider myself to be relatively well informed and I was under the impression it had shown the spying to be illegal… Ive been brainwashed by the MSM!

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  26. rangitoto (144 comments) says:

    I’d say eating the contaminated milk power would be a lot less risky than eating in thousands of restaurants in China or even some here. The reaction is hysterical nonsense

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  27. lastmanstanding (1,154 comments) says:

    Fonterra is under investigation by FMA for failing to disclose to the market as required under the continuous disclosure rules. The problem is Fonterra thought it was OK to make a disclosure several days after it knew of the problem. NZX Rules are clear and concise. A listed entity is required to disclose IMMEDIATELY it is aware of a material matter that MAY impact on its share price. IMMEDIATELY has been defined as being as soon as the Directors are aware of a matter. Not 24 hours later Not 48 hours later Not 72 hours later.

    With the modern communication systems having moved on from carrier pidgeons this means an emailed or faxed notice to NZX. This should have been a priority but I guess having been newly listed and in the heat of the moment the Paid Liars ie PR people at Fronterra didn’t know and understand the significance of NOT alerting NZX at the same time as they issued their very first PR bull, shit notice.

    And that’s where FMA will have them. Fonterra issues bull shit PR media releases BEFORE they thought of notifying the markets ie NZX.

    Yet another black market against this company that is starting to resemble Mannies Music Parlour as regards its Governance and Management.

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  28. Mark (1,301 comments) says:

    It would appear that a number of contributors here may wish think this is a storm in a tea cup. It is nowhere close to that simple and the government quite rightly has treated this as a serious threat to our trade and reputation. It is a bit overly optimistic to think otherwise at this point.

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  29. tvb (3,939 comments) says:

    The impression being given is the PM simply ticks these applications for warrants with very little thought. The Government generally is giving the impression that privacy issues matters for very little. And the role of the media is not fully appreciated. They are seen as subversive and are obsessed with trivia. I have sympathy for that but they are still powerful and have to be appeased.

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  30. swan (651 comments) says:

    lastmanstanding,

    Fair enough – the market disclosure was poor. That isnt what is generating all the talk though I dont think. I doubt it is what John Armstrong is referring to.

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  31. Nookin (2,887 comments) says:

    Swan

    As much as I hate extensive copy and paste, here is Kitteridge’s executive summary. If you have been led to believe that there was actual illegality then you have been hoodwinked ( in my view, mischievously so)

    “Executive summary
    1. The Government Communications Security Bureau (GCSB) plays a vital role in New Zealand’s security by obtaining, providing and protecting sensitive information. The time I have spent within GCSB has left me in no doubt that New Zealand needs this organisation now more than ever. The increasing threat of cyber attacks and the protective role GCSB plays is one part of this story, but GCSB does a wide range of other things that are essential to the well-being of New Zealand.
    2. It is, however, vital that an organisation that exercises intrusive powers of the state does so in a way that is entirely lawful. Where a state organisation’s internal operations must necessarily remain secret, because of their sensitivity, there need to be robust internal systems and effective external oversight so that the public can be confident in the lawfulness of those operations.
    3. Concerns were raised about legal compliance within GCSB as a result of events involving Mr Kim Dotcom. I was seconded to GCSB to carry out a review of compliance systems and processes at GCSB, commencing on 2 October 2012. The review took six months. In the course of this review, I focused on two main areas:
    a. supporting the Director of GCSB to ensure that all of GCSB’s activities were lawful, and in particular activities that the Director had directed be stopped at the end of September 2012, before they could be considered for resumption; and
    b. reviewing GCSB’s compliance framework.
    4. The Director was concerned to ensure that no other errors had occurred that were similar to that concerning Mr Dotcom. The Director’s concern led to a number of other instances, in which GCSB had assisted domestic law enforcement agencies between 1 January 2009 and 26 September 2012, being referred to the Inspector-General of Intelligence and Security for review. Those cases were subsequently found to be lawful.
    5. The review of activities that had stopped (involving assistance to other domestic agencies) led the Bureau to seek legal advice from the Crown Law Office on a number of issues. In relation to some assistance that GCSB has provided to the New Zealand Security Intelligence Service and (more rarely) the Police since before the enactment of the GCSB Act 2003, the Solicitor-General confirmed the difficulties in interpreting the GCSB Act and the risk of an adverse outcome if a Court were to consider the basis of that assistance. All relevant instances of assistance (concerning 88 individuals in total), dating between 1 April 2003 and 26 September 2012, have been identified and a report has been provided to the Minister Responsible for the GCSB, in parallel with this report, so that he can determine the appropriate action to be taken.
    6. I conclude, in relation to this and other legal issues, and to ensure that GCSB can carry out its work in the future with a clear understanding of the law, that legislative clarification would be desirable.
    7. The second limb of my review involved considering GCSB’s compliance against a standard compliance model, involving the following cycle of activity:
    a. assessing and identifying legal compliance obligations;
    b. supporting compliant behaviour and preventing non-compliance (including internal guidance, procedures, internal audit, and external oversight);
    c. responding to non-compliant behaviour;
    d. external reporting;
    e. measuring; and
    f. improving.
    8. Part I of this report sets out my analysis of GCSB’s compliance activity against this standard compliance model. In all these areas of compliance significant opportunities for improvement are identified. I also recommend that external oversight of GCSB be strengthened.
    9. In the course of this work I concluded that the issues identified in relation to compliance were symptomatic of underlying problems within GCSB, concerning GCSB’s structure, management of its information, capability and capacity. Those issues are addressed in Part II of this report.
    10. A consolidated table of recommendations is attached at Appendix 1. If implemented, the changes I recommend will constitute a considerable change programme, which in my view will take more than one year to complete. It is important to note that my report represents a snapshot in time, and that a number of recommended changes have already been made or are in train.
    7
    11. Throughout my time at GCSB the staff with whom I spoke consistently expressed their commitment to the rule of law. It is my strong belief that when GCSB has addressed the issues raised in this report, it will not only be an organisation that continues to provide great public value, but also an institution in which the public can have trust and confidence.
    Rebecca Kitteridge 22 March 2013

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  32. swan (651 comments) says:

    Nookin, thanks. WTF has everyone been going on about??

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  33. tvb (3,939 comments) says:

    The Government should be able to deal with GCSB issues as a lay down misea. The fact that the Opposition have got some traction on the issue is a failure in political management contrast the frontera matter which the Government has handled very very well. What the company hoped to achieve keeping the problem secret for several months while children’s lives were at risk beats me. This appears as a major error of judgement of the Chief Executive.

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  34. Nookin (2,887 comments) says:

    “WTF has everyone been going on about??”

    For the extreme activists, it is a chance to focus attention on themselves with extreme rhetoric. For Labour, it is political opportunism even though they know that the law to be passed is more protective than the law that they thought they had already passed. As for Norman — he has hidden his other flag and doesn’t want anyone snooping in case they take it away as well.

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  35. Viking2 (10,713 comments) says:

    Fonterra chief executive Theo Spierings says the situation in China is stable and he is confident the dairy giant’s reputation will be restored.

    Spierings, who flew to China at the weekend as the milk contamination scare unfolded, decided last night to come back to New Zealand.

    The feedback from Chinese customers and authorities was that “they really appreciated the openness from day one,” he said.

    Chinese officials told him they understood human errors happened, and what mattered was the way the situation was responded to, he said.

    ===========================

    Fonterra accepts China price review
    RICHARD MEADOWS
    Last updated 15:34 07/08/2013

    The Fonterra Shareholders’ Fund is holding its ground despite another blow to the dairy company’s already shaky public image this afternoon.

    Chinese authorities have fined the co-operative about $900,000 after a review of its pricing practices there.

    Units in the fund have risen 1.1 per cent to $7.03 so far today, only 8c from the price they traded at before fears of a bacteria contamination were made public at the weekend.

    So Fonterra fined and presure bought to bear.
    Two faced.

    No Face to behave this way.

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  36. hj (5,692 comments) says:

    WELLINGTON/SYDNEY, Aug 6 (Reuters) – For a country that markets itself to the world with the slogan “100% Pure”, New Zealand’s environmental credentials are not as impeccable as many would think.

    The majority of its rivers are too polluted to swim in. Its record on preservation of natural environments is among the worst in the world on a per capita basis. And it is the only OECD country that does not produce a regular national report on its environment.

    The discovery by dairy giant Fonterra of a bacteria that can cause potentially fatal food poisoning in ingredients sold to eight countries exposes New Zealand’s vulnerability to food safety scares and the fragility of the clean, green image underpinning its farming- and tourism-based economy.

    Agricultural exports, including dairy, meat, fruit and wine, command high premiums internationally thanks to New Zealand’s reputation as a producer of safe, natural and high-quality food.

    “It was only a matter of time before our dirty little secret came out,” said Jill Brinsdon, brand strategist at Radiation, a brand agency in Auckland.
    http://www.huffingtonpost.com/2013/08/06/new-zealand-environment_n_3710859.html?ncid=edlinkusaolp00000003

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  37. Ross12 (927 comments) says:

    “It was only a matter of time before our dirty little secret came out,” said Jill Brinsdon, brand strategist at Radiation, a brand agency in Auckland.

    For a brand strategist she sure as hell doesn’t know much about business and her business. If I was an Auckland business looking for an agency I would be stiking that one off the list first !! No matter what you think you don’t go parrotting your political beliefs to the international press. Essentially that statement is a political one.

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  38. rushmore (1 comment) says:

    Fonterra’s latest outburst is the direct result of sabotage.
    Evidence of sabotage is provided in an email from England posted to David Mathews of Fonterra.co.nz.
    Fonterra should make this public and stop attempts at cover up. Fonterra was aware of an attempt to sabotage its Hamilton plant products as early as 2010 according to an email sent from England to a number of Fonterra executives and it did nothing to protect the plant from such an attack. But why New Zealand and why now? In face of the aftermath these questions are largely academic, the important question is: Is Fonterra equipped to handle the possibility of further attacks? As far as New Zealand is concerned, Fonterra is a strategic industry since it has a pivotal effect on the New Zealand economy. As such it should be shielded against possible sabotage, with today’s technology implementing an effective security system is not a bank breaker; security and surveillance should be considered as important as production itself.
    Rushmore
    Protecting New Zealand

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