Thursday, May 13, 2021

Grovelling apologies fail to get Rio Tinto out of a hole | Rio Tinto

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As acts of corporate vandalism go, Rio Tinto’s obliteration of a sacred site in Western Australia is right up there. The expansion of an iron ore mine knowingly destroyed a cave containing 46,000 years of human history. It had yielded a 4,000-year-old hair plait that showed a direct genetic link with living descendants.

The scandal has already cost Rio Tinto a chief executive, Jean-Sébastien Jacques, and other bosses, but the backlash from the destruction of the Juukan Gorge is still reverberating, as the remaining executives at the FTSE 100 miner will find at its annual meeting on Friday.

Shareholders appear to be rallying to give Rio Tinto another bloody nose. Hefty executive payoffs are particularly in the spotlight. Glass Lewis, Institutional Shareholder Services and Pirc have all advised their big investor clients to vote down Rio Tinto’s remuneration reports because of the payouts awarded to Jacques.

ISS said Rio Tinto should use its power to claw back more of Jacques’s bonuses. He still held on to shares worth £27m, ISS said, despite having had £2.7m taken away last summer.

Rio Tinto has spent the last few months doing its best impression of a grovelling corporate apology in an effort to convince angry investors that the company does in fact care about traditional owners of the Australian lands it wants to mine. Last week it held “cultural heritage” seminars and belatedly appointed an indigenous advisory group.

Formal portrait photo of Jean-Sébastien Jacques in a suit and tie
Jean-Sébastien Jacques, Rio Tinto’s now-departed chief executive. Photograph: Hannah McKay/Reuters

The annual meeting could yield more changes. Revolts over pay are not a new phenomenon (even if fitful hopes that “shareholder springs” will result in meaningful executive pay cuts have so far proved false), but a newer trend will also be evident on Friday: increased pressure for climate action.

Investors are likely to back a shareholder resolution calling for emissions-cuts targets as well as an advisory resolution that says the company should suspend membership of lobby groups whose policies contradict the Paris climate goals.

Rio’s under-pressure board has given the climate resolutions its backing – although it has said it will not set gold-standard science-based targets. Experts are generally sceptical of corporate promises to cut carbon emissions if they are not science-based.

The latest resolutions may not be the most onerous for the company, but they will give it fewer hiding places in future as pressure for actual emissions cuts ramps up.

Polling by Interactive Investor, an online platform, last week showed that 70% of 1,000 retail investors surveyed said they would back a greater emphasis on climate concerns. Those measures would include adding climate metrics to bonus calculations, as well as targets on “cultural heritage management”.

An identical proportion of the surveyed investors said that they believed company chairs and chief executives should be held to account on environmental, social and governance issues, Interactive Investor said.

Retail investors may rarely tip the scales in company votes, given the size of big institutional shareholdings, but the scale of unease shows that executives cannot just tuck away environmental or social concerns in bland sustainability reports buried on their websites.

Rio Tinto’s replacement chief executive, Jakob Stausholm, struck a philosophical tone last week on the Juukan Gorge debacle, commenting on the temporary nature of human existence. But there are signs that tougher scrutiny of environmental or social debacles might be here to stay.

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