Investors teamed up to roast Rio over rock shelter blast, warn departures are first step
by Nick ToscanoA coalition of 11 investors ramped up pressure on Rio Tinto's board prior to it ousting the CEO, signing a letter that took it to task for failing to take greater accountability and conduct an independent audit of its cultural heritage and community engagement policies.
As the backlash over the destruction of the 46,000-year-old Juukan Gorge rock shelters sent the board into crisis meetings last week, the group of fund managers and asset owners wrote to Rio Tinto chair Simon Thompson and his fellow directors saying they had failed to outline how the miner could restore trust in the community.
It also said a review led by an independent party rather than a board member was needed to give investors confidence that the failures that led to the blasting of the site had been thoroughly and independently examined.
One of the signatories, the $130 billion superannuation fund Aware Super, said the investors thought it was important to send a stronger message about their collective views last week.
"We were concerned, and we wanted to see action," said Liza McDonald, the fund's head of responsible investments.
"Collective engagement – so the board is hearing the same consistent message about actions and outcomes – is an important tool that we have."
Aware Super, formerly known as First State Super, said the board's announcement on Friday that three top Rio Tinto executives, including Mr Jacques, iron ore boss Chris Salisbury and corporate affairs boss Simone Niven, would be leaving reflected "clearer and stronger" accountability for the incident that investors had been seeking.
However, the fund said it remained concerned about the lack of independent oversight in Rio's investigations into how the site was destroyed without traditional landowners' consent. Ms McDonald said the fund believed the review launched following the disaster, led by non-executive director Michael L'Estrange, did not go far enough in interrogating the company's processes and policies.
"Were people honest and really able to open up when [the review] was conducted by a board member?" she asked.
"Was there any bias in it – conscious or unconscious – when, at the end of the day, the person undertaking the review was a board member who was very close to Rio and its operations?
"Given that a number of investors have now asked of them to undertake this independent review, it's an indication we think it does need to occur to build back the trust with investors but also with the indigenous people the company work with."
As the company seeks to begin repairing strained relationships following the Juukan Gorge disaster, leading superannuation funds and Indigenous groups represented by the National Native Title Council have warned that they view the executive purge as only the first step in the rebuilding of trust with the traditional owners – the Puutu Kunti Kurrama and Pinikura people (PKKP) – and the wider Australian community.
Mr Thompson said the board's engagement over recent weeks with investors had made clear that a number of important stakeholders held "very significant concerns" with the board's initial proposal to limit penalties to about $7 million in bonus cuts. He said the board was committed to rebuilding trust and ensuring a similar situation never happened again.