Rio Tinto CEO and senior executives depart from company over Juukan GorgePublished by MAC on 2020-09-13
Source: Guardian, ABC, Bloomberg (2020-09-11)
The departure of Rio Tinto Group Chief Executive Officer Jean-Sebastien Jacques, plus two other senior managers, over the destruction of an ancient Aboriginal heritage site is welcome news.
A major mining CEO leaving a company over an issue of relations with local indigenous communities would seem impossible a decade or so ago, so it is clearly a sign of you community relations have come more significant on boardrooom agendas. Various commentators are also noting that it reflects the growing importance of so-called ethical investors.
However it is difficult to know how much this is true accountability. Even with bonuses docked the execs will leave as fabulously rich people, and will no doubt move on to well paid positions in companies and/or boardrooms anew.
What meaningful changes will happen in how Rio Tinto deals with Aboriginal communities, particularly given the significant power imbalance? More importantly will there be any changes in the law to ensure that native title holders actually have some real say over those titled lands?
However, it should at least act as a warning to all executives that how they treat communities does matter.
Rio Tinto CEO and senior executives resign from company after Juukan Gorge debacle
In a statement to Australian Stock Exchange the company confirms move that follows the blowing up of 46,000-year-old caves in Western Australia
Ben Butler, Lorena Allam and Calla Wahlquist
11 September 2020
The Rio Tinto chief executive, Jean-Sébastien Jacques, and two other senior executives are leaving the global miner after its board bowed to intense investor pressure for strong action over its decision to blow up 46,000-year-old rock shelters at Juukan Gorge in Western Australia’s Pilbara region.
Rio Tinto said Jacques was leaving “by mutual agreement” with the board.
The iron ore head, Chris Salisbury, and the corporate affairs boss, Simone Niven, will also depart, the company said on Friday morning.
The move came after a week in which investors queued up to denounce as inadequate the board’s previous decision to cut the executives’ short-term bonuses in response to the scandal and the head of an Australian parliamentary committee looking into the affair raised concerns that the company had given the inquiry misleading evidence.
Despite leaving the company all three would continue to be entitled to long-term bonuses, Rio Tinto said.
The company blew up the rock shelters, which were highly significant to the area’s Aboriginal traditional owners, the Puutu Kunti Kurrama and Pinikura people, in May, so that it could mine better quality iron ore, despite knowing for years of their importance.
In response to an outcry from Indigenous groups and investors, Rio Tinto’s board conducted a review of the decision, which led to the reduction in bonuses.
“While there is general recognition of the transparency of the board review and support for the changes recommended, significant stakeholders have expressed concerns about executive accountability for the failings identified,” the company said.
Investors have welcomed the decision. Ian Silk, the chief executive of Australia’s biggest superannuation fund, AustralianSuper, said he was “satisfied that appropriate responsibility has now been taken by executives at Rio Tinto”.
“Rio can now work with traditional owners to guarantee that its processes are appropriate for the protection of culturally important sites and that it has the right internal accountabilities,” he said.
The Australasian Centre for Corporate Responsibility welcomed an end to the “dishonest malaise of Rio Tinto’s board and senior management”, James Fitzgerald said.
“Shareholder democracy and investor action is alive and well in Australia. Corporate captains may think twice before attempting to mislead investors, not to mention a parliamentary inquiry, in future.”
The National Native Title Council welcomed Rio’s actions but said the company must make “structural change” to make sure a disaster like Juukan didn’t happen again.
“There is more work to be done,” said the NNTC’s chief executive, Jamie Lowe. “The law needs to be strengthened. We can’t rely on the goodwill of mining companies, we need the law strengthened. We can’t rely on their word that things will get better.”
The Australian Council of Superannuation Investors, which advises 38 large super funds on governance issues, welcomed the departures but said the process had been “drawn out”.
“Rio Tinto now has the opportunity to address the necessary remediation, cultural heritage and risk processes with fresh eyes,” said ACSI’s chief executive, Louise Davidson.
“Rio Tinto must prioritise working with traditional owners the Puutu Kunti Kurrama and Pinikura people to rebuild their relationship. It is critical that this is not delayed.”
In a move that recognised that the board has lacked engagement with Australian issues, the company will also promote from non-executive director to senior independent director the executive responsible for oversight of its Australian-listed arm, Rio Tinto Limited.
Sam Laidlaw will continue as senior independent director responsible for the British half of the group, Rio Tinto plc.
Davidson said ACSI was pleased to see Rio Tinto’s board recognise it needed to be more connected to Australia. “This work will be ongoing and must be a feature of future appointments to the board.
“We will also be looking closely at the separation arrangements, with the expectation that any exit won’t provide a windfall for executives on their departure.”
Rio Tinto’s chairman, Simon Thompson, said: “What happened at Juukan was wrong and we are determined to ensure that the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio Tinto operation.
“We are also determined to regain the trust of the Puutu Kunti Kurrama and Pinikura people and other traditional owners.
“We have listened to our stakeholders’ concerns that a lack of individual accountability undermines the group’s ability to rebuild that trust and to move forward to implement the changes identified in the board review.”
Jacques will remain in his role until a successor is found or 31 March next year, whichever is earlier. Salisbury and Niven stepped down from their positions on Friday and will leave the company on 31 December.
Rio Tinto boss Jean-Sebastien Jacques quits over Juukan Gorge blast
By business reporters David Chau, Michael Janda and staff
11 September 2020
- Jean-Sebastien Jacques is leaving Rio Tinto early next year after more than four years as CEO
- Two other senior executives, the heads of iron ore and corporate affairs, are also leaving
- The departures are in response to Rio Tinto's destruction of ancient Aboriginal cultural heritage sites in May this year
Rio Tinto's chief executive Jean-Sebastien Jacques will resign "by mutual agreement" following the destruction of Aboriginal heritage sites by the company this year.
The company's head of iron ore Chris Salisbury and head of corporate relations Simone Niven have also stepped down.
Mr Salisbury and Ms Niven will leave the company by the end of the year, following handover periods with their replacements.
Mr Jacques will stay at the company until March 31, 2021, or until his successor is appointed, which Rio Tinto said is to "ensure business continuity".
Rio has been under intense pressure to sack the three executives following the miner's decision to destroy ancient Aboriginal heritage sites in the Juukan Gorge in May.
Jean-Sebastien Jacques, chief executive of Rio Tinto, poses for a portrait
"What happened at Juukan was wrong and we are determined to ensure that the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio Tinto operation," Rio chairman Simon Thompson said in a statement.
"We are also determined to regain the trust of the Puutu Kunti Kurrama and Pinikura [PKKP] people and other Traditional Owners."
In a statement, the Puutu Kunti Kurrama and Pinikura Aboriginal Corporation said the PKKP people had no comment on the changes to Rio Tinto's senior executive.
"We will continue to work with Rio Tinto in the aftermath of the Juukan Gorge disaster," it said.
"Our focus continues to rest heavily on preserving Aboriginal heritage and advocating for wide-ranging changes to ensure a tragedy like this never happens again.
"We cannot and will not allow this type of devastation to occur ever again."
Chairman says investors played a key role
Mr Thompson acknowledged that shareholder concerns played a significant role in the eventual decision to part ways with the three executives who were seen as directly accountable for the Juukan Gorge blasting.
"We have listened to our stakeholders' concerns that a lack of individual accountability undermines the group's ability to rebuild that trust and to move forward to implement the changes identified in the board review."
Initially, Rio Tinto only proposed reducing the bonuses of key executives involved in the Juukan Gorge decision.
Michael Slack, the head of research at fund manager Martin Currie Australia, said his firm met with Rio Tinto management again this week "to discuss the Juukan Gorge mismanagement".
"Rio has suffered significant reputational damage here and investors believe something has failed within the company," he said today.
The Australian Council of Superannuation Investors (ACSI) welcomed the departure of the three executives, describing the process as "drawn out" but praising the miner for listening to stakeholders.
"Rio Tinto now has the opportunity to address the necessary remediation, cultural heritage and risk processes with fresh eyes," ACSI chief executive Louise Davidson said in a statement.
"Rio Tinto must prioritise working with traditional owners, the Puutu Kunti Kurrama and Pinikura people, to rebuild their relationship.
"It is critical that this is not delayed."
Responsible Investment Association Australasia (RIAA) chief executive Simon O'Connor echoed the sentiments of other investor groups.
"This tragic event has uncovered systemic issues around how mining companies approach matters relating to cultural heritage, including how they engage with traditional owners," he said.
"Many responsible investors will be scrutinising much more closely the activities of all resources companies, to seek assurance that there are rigorous processes and practices in place which can prevent an event like this happening again in the future."
Council praises 'first step' but wants review
The National Native Title Council (NNTC) welcomed the dismissal of Rio Tinto's three executives, but said this was only the first step.
"I think we are all in agreeance that the initial measures doled out by the Rio board in cutting executive bonuses did not go far enough," NNTC chief executive Jamie Lowe said.
"Several million dollars in lost income is a drop in the ocean for these individuals, whose governance failings and calculated decisions robbed Australia and Traditional Owners of a world heritage-significant site."
The NNTC has also called for an "open, transparent and independent review into Rio's processes and company culture to prevent an incident like the Juukan Gorge destruction from happening again."
Board's disconnection a major risk: WA Treasurer
WA Treasurer and Aboriginal Affairs Minister Ben Wyatt said he believed Rio Tinto's board had only grasped the depth of discontent with the Juukan Gorge decision in the past 48 hours.
"The great risk to their business ... is the vast distance between their board and where they make 75 per cent of their earnings — the Pilbara," Mr Wyatt said.
"That is the greatest risk to their business. That needs to be rectified.
"I look at the board, and there's no-one on it who has any particular expertise or background or understanding of Western Australia or the Pilbara.
"There's no-one on that board with any real understanding of the Aboriginal groups who own the country on which they operate. That, for me, screams risk, and it's something I am stunned hasn't been picked up over the years."
Rio's share price dropped by as much as 0.9 per cent in early trade today but rebounded to be trading 0.15 per cent lower than yesterday's close, at $100.30, by 11:43am AEST.
Rio Shakeout Shows How Powerful Investor Advocacy Has Become
By Matthew Burgess and David Stringer
11 September 2020
- Shareholders put board on notice to improve community outreach
- CEO to depart miner after destruction of Aboriginal sites
The departure of Rio Tinto Group Chief Executive Officer Jean-Sebastien Jacques over the destruction of ancient Aboriginal heritage sites serves as a lesson to companies worldwide about the growing power of investors and their demand for accountability.
In the face of concerted shareholder pressure, the world’s second-biggest miner announced Friday that Jacques will leave the company at the end of March, or when a successor is appointed. Chris Salisbury, iron ore unit CEO, and Simone Niven, group executive of corporate relations, will also exit.
The backlash over the destruction of the rock shelters, that were used by Aboriginal Australians for cooking and shelter as long as 46,000-years ago, and the producer’s weak initial response, reflects the widening advocacy battlefront across environmental, governance and social issues. Investors welcomed Rio’s announcement, but put the company on notice they’ll be scrutinizing its future engagement with Indigenous communities.
Here’s how investors, analysts and policymakers reacted:
Debby Blakey, CEO of Health Employees Superannuation Trust Australia
“While we welcome the steps taken by Rio today, changes in senior leadership should not distract from the need for an independent and transparent review of all current agreements between the company and Traditional Owners. The nature of these agreements and how they are negotiated represents a systemic risk for investors that will not be mitigated by executive changes.”
Kristian Fok, CIO of Construction & Building Unions Superannuation
“Rio must now work to restore the trust of its stakeholders, its shareholders and the community at large. We will continue to constructively engage with Rio regarding Board oversight and composition so that Rio is positioned to do what it takes to ensure unique sites of cultural heritage are protected, Rio maintains it social license to operate and to make sure this never happens again.”
Ian Silk, CEO of AustralianSuper
“We understand that no action by Rio Tinto can undo the destruction of the profoundly cultural significant sites in the Juukan Gorge, and the impact on the traditional owners of the land, the PKKP people.”
“Rio can now work with traditional owners to guarantee that its processes are appropriate for the protection of culturally important sites, and that it has the right internal accountabilities. We will continue to take an active interest in how these changes are implemented.”
Simon O’Connor, CEO of the Responsible Investment Association Australasia
“This tragic event has uncovered systemic issues around how mining companies approach matters relating to cultural heritage, including how they engage with Traditional Owners. Many responsible investors will be scrutinizing much more closely the activities of all resources companies, to seek assurance that there are rigorous processes and practices in place which can prevent an event like this happening again in the future.”
Louise Davidson, CEO of the Australian Council of Superannuation Investors
“Rio Tinto now has the opportunity to address the necessary remediation, cultural heritage and risk processes with fresh eyes.”
“Investors will continue to engage with Rio Tinto to understand how the company will manage this transition period. We will also be looking closely at the separation arrangements, with the expectation that any exit won’t provide a windfall for executives on their departure.”
Warren Entsch, Chairman of the Northern Australia Committee
“The evidence received by the committee has made clear that the internal culture at Rio Tinto was a significant factor in the destruction of these sites. New leadership, new structures and new operating principles within the company are essential to preventing such catastrophes in the future.”
Daniel Kang, Senior Analyst at Bloomberg Intelligence
“The chairman totally misread the mood in the market and expectations from society. The whole issue of social license to operate is a massive issue that is not going to shrink.”
Marcia Langton, Associate Provost, University of Melbourne
“The company since the appointment of Jean-Sebastien Jacques has treated Australia like a resource colony, based as it is in London. The board too should take note of the way Australians feel about how the company has treated the country in which most of its profits are sourced.”
Puutu Kunti Kurrama and Pinikura Aboriginal Corporation
“We will continue to work with Rio Tinto in the aftermath of the Juukan Gorge disaster. Our focus continues to rest heavily on preserving Aboriginal heritage and advocating for wide-ranging changes to ensure a tragedy like this never happens again. We cannot and will not allow this type of devastation to occur ever again.”
— With assistance by Adam Haigh, and James Thornhill