Rio Tinto ‘didn’t follow old systems’

Rio Tinto CEO Leon Davis (L) and ATSIC chairman Gatjil Djerrkura sign an agreement in 1998.

Former Rio Tinto boss and Westpac chair Leon Davis’s first reaction to hearing of the Juukan Gorge tragedy was “the systems we put in place to manage the company have failed to be ­followed”.

Now three months after the 46,000-year-old site was blown apart for eight million tonnes of iron ore, Mr Davis thinks the state government should allocate part of the royalties it collects from iron ore mining to a sovereign wealth-type fund that traditional owners can manage for the purposes they choose.

He also advocates an indigenous representative on the Rio Tinto board, noting relations with traditional owners is a global issue for a company like Rio Tinto.

It goes without saying that the man who ran Rio Tinto from 1997 to 2000 with the legendary Bob Wilson wants the company to apologise to local landowners and work with them.

The suggestion that the state government allocates part of the royalty comes as the Gumala Aboriginal Corporation is demanding a full audit of Rio Tinto’s royalties.

The Weekend Australian revealed Rio Tinto is embroiled in a dispute with the key group of native title owners after writing to the corporation, notifying its directors of an royalty underpayment spanning “a number of years” and attaching payment of about $40m plus interest.

Shareholder AustralianSuper said on Friday that “Rio’s actions are totally unacceptable”.

The pressure is mounting on chair Simon Thompson to manage the aftermath of the tragedy.

In an interview with The Australian, Mr Davis said: “When I was an executive I always worked from the position my job was to create value for shareholders first, but to do that best you need to operate in a way where you get on with people, safety and work out how best to satisfy their purposes.”

When running CRA prior to its takeover by the UK-based RTZ to create Rio Tinto in 1995, Mr Davis made a landmark speech backing the new native title law and saying the mining industryrisked losing its licence to operate by not trying to do the right and pragmatic thing.

He urged working with the traditional owners.

His philosophy was simply that doing what was socially right is often what is right in the business sense.

Mr Davis, who ran CRA before its takeover and move to London, worked from the view business should have a cold eye and a warm heart.

The sovereign fund, he suggested to The Australian, would be designed to help indigenous people for the next 100 years, acknowledging that over that time their needs would change.

Mr Davis thinks there will be a growing divide between urban indigenous people who just want to get on and the dwindling number still on the land.

He argues they don’t want money per se, but recognition.

Mr Davis’s management process was ironically mirrored by the now BHP chair Ken Mac­Kenzie when he ran Amcor from 2005 to 2015.

Rio Tinto has a book, “The Way We Work”, which is the operating model for executives around the world, with edicts like don’t give bribes or payments to political parties; treat all countries the same; zero deaths; and put health and safety, the environment and communication with the indigenous community on an equal footing with financial metrics.

Management bonuses were paid on performance on the wider objectives and the London head office would tour the globe checking performance against all the indicators.

The Juukan Gorge issue, according to Rio Tinto testimony to a parliamentary committee, has been going on for 17 years since 2003.

This tells you that, particularly in the latter years, head office was not checking on the wider metrics — including former boss Sam Walsh, who claims to have issued an edict against the blast.

Rio’s head office did its best to provide help to site management, with anthropologists and indigenous advisers to help them achieve those objectives.

The divisional chief executives reported to the board based on the wider metrics, so the board would have been aware of issues like Juukan Gorge.

Site management would also present their plans, including health and safety indigenous issues, so everyone up the chain had a clear idea about what was happening.

Local management had responsibility, which meant better handling of industrial relations and community relations.

Davis remembers Rio Tinto in South Africa received a letter from the late Nelson Mandela complementing it on its treatment of traditional owners in that country. It needs to do plenty more now to receive a similar backing from the PKKP and Pilabara traditional owners.