Pressure mounting on Rio Tinto board
The Church of England’s pension fund has added to pressure on Rio to take stronger action over the destruction of Juukan Gorge.
The Church of England’s pension fund has added to growing pressure on Rio Tinto to take stronger action over the destruction of 46,000-year-old heritage sites in the Pilbara, saying it was a test for the global miner’s board.
The comments come as Rio chief executive Jean-Sebastien Jacques tours the Pilbara talking to traditional owner groups over the Juukan Gorge disaster, and ahead of a board meeting this week that is expected to discuss additional sanctions against Mr Jacques, iron ore boss Chris Salisbury and corporate relations chief Simone Niven.
While the timing of the meeting and the possible outcomes are not yet clear, sources close to Rio say that “all options are on the table” as pressure mounts on the board to consider whether the trio have a future at the mining giant.
The CoE pension fund added to the pressure on Wednesday, confirming institutional investors had been pushing Rio to strengthen its response to the Juukan debacle.
Amid criticism that stripping bonuses worth about $7m was an inadequate response to the destruction of the heritage sites, Adam Matthews, head of engagement for the Church of England Pensions Board, told UK radio the issue was now a “test for the board”.
“The (internal) review has clearly shown that there’s been a series of failings at the company. It’s made a recommendation of actions they need to take, it’s also penalised them with reductions of bonuses,” he said.
“It’s obviously for the board to decide who the chief executive is. We’ve been part of dialogues with the chairman over the past months, and with other investors both in Australia and in the UK, and we’ve expressed the deep concern we have around this. So it’s very much a test for the board of how serious their response is.
“It’s clear that investors don’t feel that the measures they’ve outlined are sufficient.”
With £2.8bn ($5bn) in funds under management, the Church is not the biggest investor on Rio’s books. But the comments made by Mr Matthews will weigh heavily on the board, given the CoE pension fund has often taken the lead role in speaking for a broader coalition of institutional investors concerned at environmental, social and governance matters.
In 2019, in the wake of Vale’s last tailings dam collapse, the fund played a major role in building a coalition of more than 100 institutions to push for action on tailings dam safety. It has also led the revolt against climate change policies at major miners.
Australian fund managers have been vocal in calls for further action against senior management over Rio’s failures at Juukan, with Ian Silk, chief executive of AustralianSuper, saying in August the penalties “fall significantly short of appropriate accountability”.
But Rio has so far been able to take some comfort from the more muted response from the international investment community.
Opinion shifts
But the fact that the CoE went public with its pushback on Rio’s response to Juukan marks a significant shift in the weight of international opinion, and will be seen as an expression of broader support for stronger action and not just as the voice of a single concerned investor.
It comes after leaks to the UK press indicating Rio’s board is itself split on the issue of additional executive sanctions. It is not yet clear whether the board leaks reflect genuine unease at Rio’s weak response to the Juukan Gorge disaster, or whether dissident board members are eyeing off Simon Thompson’s job as Rio chairman, or even just engaging in back-channel self-protection against reputational damage.
Whatever the motivation, as Rio’s board weighs the future of Mr Jacques, Mr Salisbury and Ms Niven, they face another problem of their own making.
Mr Thompson publicly backed the trio when releasing the Rio board review of Juukan Gorge, saying that “JS, Chris and Simone really are the right people” to lead Rio out of the crisis.
But that may only be because of a lack of options. If the board gives Mr Jacques his marching orders, they will also need to appoint an interim replacement, as they search for a new CEO.
As a former executive director of Anglo American, Mr Thompson himself is the only member of the board with experience of running a tier one mining company. But he is also tainted with Rio’s weak response to the crisis.
Megan Clark has held senior roles at BHP, but not recently. And David Constable, Simon Henry, Sam Laidlaw and Hinda Gharbi also have senior executive experience at corporate majors, but in oil and gas, energy and chemical industries, not mining.
The rest of Rio’s board are former public servants and bankers.
When former boss Tom Albanese was forced out in 2013, Rio board was able to turn to iron ore chief Sam Walsh as a ready-made successor in troubled times.
But, to the current board’s discredit, three years into Mr Jacques’ leadership of Rio there is still no obvious successor among Rio’s senior executive ranks.
Chief financial officer Jakob Stausholm is relatively untainted by recent disasters, but has only been in the job for two years.
Mr Salisbury falls with Mr Jacques, Stephen McIntosh has already announced his intention to retire, and Arnaud Soirat is tainted by Rio’s recent failures at Oyu Tolgoi. That leaves only energy and minerals boss Bold Baatar and aluminium chief Alf Barrios, neither of whom would be likely to ease concerns about Rio’s leadership in turbulent times.