Rio chairman rejects talk of board friction

Chastened Rio Tinto chairman Simon Thompson has vowed to steer the mining company through the replacement of ousted chief executive Jean-Sebastien Jacques and has rejected suggestions that boardroom divisions have reached problematic levels.

Mr Thompson’s determination to ensure Rio does not lose its chairman and chief executive simultaneously comes after investors forced him to change direction on the board’s original plan to retain Mr Jacques and other top executives linked to destruction of Juukan Gorge, and as super fund HESTA said the board still did not have appropriate governance and oversight of traditional landowner agreements.

Mr Thompson is expected to appoint Mr Jacques’ replacement before March 31, and Mr Jacques told Rio staff in an internal memo on Friday that he was determined to ‘‘create value’’ until he left the company.

‘‘The mark of a truly great company is not about what its people do when times are good and things are easy, but what they do when times are tough and challenging,’’ said Mr Jacques, adding that he was sure Rio would ‘‘bounce back a better company’’ after the Juukan Gorge scandal.

‘‘I remain committed to working with all of you to make safety our number one priority and to continue to create value until I leave.’’

The British media suggested last week that British directors Simon Henry and Sam Laidlaw had led the charge for harsher penalties against the executives, but other Rio directors have privately disputed that version of events.

In fact, Mr Laidlaw is chairman of the Rio remuneration committee that devised the financial penalties that were announced on August 24 and were subsequently deemed by investors to be inadequate.

I think in the end, we have done what is right for the company and it is part of the process of rebuilding trust.
— Simon Thompson, Rio chairman

Asked whether his board was now divided to a problematic degree, Mr Thompson said: ‘‘No it is not, and of course, I have seen the press speculation on that.

‘‘This is a decision the board has taken collectively with JS and Simone and Chris, and it has been of course a difficult issue because we have had to balance a whole range of views expressed to us on the appropriate accountability for this.

‘‘But I think in the end, we have done what is right for the company and it is part of the process of rebuilding trust and moving forward’’.

The previous chairmen of Westpac (Lindsay Maxsted) and AMP (David Murray) had left within the past year when their initial responses to scandals were deemed inadequate by investors, but Mr Thompson said he would not follow that example.

‘‘I am very focused now on managing the succession of the CEO, which is obviously an absolutely critical decision for Rio as well as continuing to oversee the operational and financial performance of the business and importantly making sure we do implement all their recommendations set out in the board review and restore our reputation as a leader in communities and reputation management,’’ he said.

None of the investors spoken to by The Australian Financial Review since Friday’s sackings expressed a desire for Mr Thompson to leave immediately, but most believe his 30-month reign is closer to the end than the start.

Mr Laidlaw and Simon McKeon shape as the most likely successors to Mr Thompson, given both now serve as senior independent directors of Rio in the UK and Australia respectively.

The man who appointed Mr Jacques, former Rio chairman Jan du Plessis, declined to comment when contacted on Friday.

'Dangerously close to scapegoating'

Azvalor Asset Management analyst Paul Gait said investors should focus on fixing problems rather than seeking scalps for the sake of it.

‘‘It’s easy to make these things ad hominem, but that gets dangerously close to scapegoating and what’s worse is that it makes us think we’ve solved the thing, when we’ve done no such thing,’’ he said. ‘‘If all that happens is that Rio brings someone in from outside the industry, what will improve? Nothing. It needs someone with genuine skin in the game.’’

Between now and his exit, Mr Jacques may have to make another appearance before the parliamentary inquiry into Juukan Gorge.

Inquiry chair Warren Entsch issued a statement on Friday saying the committee wanted to meet with the departing executives ‘‘to further discuss Rio Tinto’s previous evidence to the inquiry and explore the implications of the announced changes at the company’’.

Mr Entsch expressed surprise at Rio’s claim that no member of the executive committee was aware of the significance of Juukan Gorge before the traditional owners expressed concern at its destruction, given the sums Rio had spent on archaeological studies in the previous six years.

If Mr Jacques does return to front the inquiry, Mr Entsch said the French-born executive would probably be questioned over whether his infamous 2016 comment that Rio staff should ‘‘fit in or f--- off’’ was about safety, or about ‘‘deadwood’’ within the company’s ranks.

The 'deadwood' debate

‘‘We haven’t got evidence and we will certainly look into that further, it goes to the character,’’ Mr Entsch said.

Asked about the comment by the Financial Review in 2018, Mr Jacques did not mention safety.

‘‘There were people in the room saying, ‘There is a lot of deadwood.’ I said, ‘You know what? The vision is very clear, that’s where we want to take the company, we want to move forward and if some people are stuck in the past and don’t want to be on the train or the boat or the journey, they have a choice [to leave],’’ he said.

Rio told the inquiry this month that the comment was made in the broader context of safety and was intended to convey an attitude of zero tolerance towards lax safety standards.

‘‘Mr Jacques was expressing the sentiment that we will not tolerate any breaches of safety in any of our operations around the world, by any of our employees. This is non-negotiable,’’ the company said.

The parliamentary inquiry is not the first time Mr Jacques has explained the comment as being in the broader context of safety; he also linked it to safety when speaking at a Melbourne Mining Club function in London in 2018.

‘‘People said ‘how are you going to deal with the deadwood we have in this company, because we have lots of deadwood, we have lots of people who don’t comply with safety rules, so what are you going to do’,’’ Mr Jacques told the audience.

‘‘On safety, there is no room for manoeuvre whatsoever. Either you are safe and you don’t put your life at risk and you don’t put the lives of your colleagues at risk or you bugger off.

‘‘So yes I’ve said and if I had to say it again to the same question, I would say exactly the same answer.’’