Rio Tinto (ASX:RIO) heads roll, but investors want more

Mining company does stunning backflip the envy of Olympic gymnasts, but shareholders demand permanent attitude change.

| More on:
headless business man with smoke pouring from neck representing interest rate hike impact on ASX shares

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The CEO and two other executives have now departed Rio Tinto Limited (ASX: RIO), but shareholders are demanding more.

Chief executive Jean-Sebastien Jacques, iron ore head Chris Salisbury and corporate affairs boss Simone Niven all exited Friday by "mutual agreement".

The mining giant made the move in reaction to shareholder outrage over the destruction of Juukan Gorge, a site of significant historical and cultural value in Western Australia.

What led to this?

Only two weeks ago, Rio Tinto refused to blame any one person or decision over the May explosion, insisting $7 million reductions in exec bonuses were enough.

That left shareholders, including major superannuation funds and the Future Fund, fuming.

"Does the company feel that £4 million is the right price for the destruction of cultural heritage?" Australian Council of Superannuation Investors (ACSI) chief Louise Davidson said at the time.

Future Fund chair and former federal treasurer Peter Costello reportedly met Rio Tinto chair Simon Thompson to tell him heads would have to roll.

So on Friday morning the Rio Tinto board executed a stunning backflip, cutting loose its CEO and two senior executives.

Sackings welcome but Rio has plenty more to do

However, there was more work for Rio Tinto to do, according to shareholder advocate Australasian Centre for Corporate Responsibility (ACCR).

"The removal of these three executives is just the first step," ACCR legal counsel James Fitzgerald told The Motley Fool.

"The behaviour of the Board and senior management is reminiscent of the arrogant ignorance that led to Rio Tinto's withdrawal from Bougainville in 1989."

While the "tragic destruction" of Juukan Gorge cannot be undone, the "dishonest malaise" in the four months since had disgusted shareholders. 

"Investors have stepped up in this instance and demonstrated that they will not accept corporate misinformation and the absolute disrespect to cultural sites that has become Rio's modus operandi," said Fitzgerald.

"Shareholder democracy and investor action is alive and well in Australia."

The ACSI welcomed the executive departures, but also warned more action was required.

"Rio Tinto now has the opportunity to address the necessary remediation, cultural heritage and risk processes with fresh eyes," said Davidson on Friday.

"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."

Executives better 'think twice'

Fitzgerald said captains of industry would now "think twice" before misleading investors, the community and parliamentary enquiries.

"This is just the first step on a long path towards restoring Rio Tinto's good practice and reputation in its relationships with Indigenous peoples."

There were reports that Rio Tinto's own cultural relations employees were muzzled or ignored in the decision-making leading up to the Gorge blow-up.

"The company's conscientious but beleaguered communities staff deserve to be supported and encouraged in their important work," said Fitzgerald.

Future board appointments at Rio would be carefully monitored, said Davison, to ensure awareness of community and societal responsibilities.

"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."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Unsure man analysing data on laptop.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors endured a rough day of trading this Tuesday.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Share Market News

ASX 200 takes the latest RBA interest rate verdict in stride

The ASX 200 looks to have shaken off today’s RBA interest rate call.

Read more »

A mature-aged couple high-five each other as they celebrate a financial win and early retirement
Share Gainers

Why this ASX 300 stock is soaring 12% after a disastrous year

This company has had a dramatic reversal of fortunes this Tuesday...

Read more »

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
Share Gainers

Why Core Lithium, Imugene, Lifestyle Communities, and Mineral Resources shares are charging higher

These shares are having a good session. What's going on?

Read more »

A miner stands in front oh an excavator at a mine site
Broker Notes

Broker says buy the dip on ASX 200 uranium share with 69% upside

Shaw and Partners says this ASX uranium stock is trading at an attractive price point right now.

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Domino's, Lynas, Paladin Energy, and St Barbara shares are sinking today

These shares are having a tough session. What's going on?

Read more »

A young woman smiles as she rides a zip line high above the trees.
Share Gainers

4 ASX All Ords shares up 315% to 682% in a year!

Investors have sent these ASX All Ords shares flying higher. But why?

Read more »

Woman on a swing at a beach, symbolising passive income.
Dividend Investing

Overinvested in Fortescue shares? Here are two alternative ASX dividend stocks

Let’s unearth some other passive income opportunities.

Read more »