Rio Shakeout Shows How Powerful Investor Advocacy Has Become

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.

Rio Shakeout Shows How Powerful Investor Advocacy Has Become

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.”

©2020 Bloomberg L.P.

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