Canberra presses Rio Tinto to appoint Australian as next CEO

Government asks mining group to make move after destruction of ancient Aboriginal site

Canberra has asked Rio Tinto to appoint an Australian as its next chief executive as investors and officials push the mining group to sharpen its focus on a country that generates the bulk of its earnings.

The request by Josh Frydenberg, Australia’s treasurer, follows the Anglo-Australian company’s decision to replace French CEO Jean-Sébastien Jacques and two other executives over their role in the destruction of a 46,000-year-old Aboriginal site.

It coincides with the Australian government’s push to tighten foreign investment rules and protect strategic industries, given concerns over deteriorating relations with China and the impact of Covid-19 on supply chains.

“Rio Tinto is one of the great companies of the world with a proud Australian history,” Mr Frydenberg said on Monday. “With the vast majority of its revenue coming from Australia, it would be fitting to once again see an Australian as chief executive along with the majority of the board.”

“It was a constructive conversation,” said Mr Frydenberg, whose comments were first reported by the Australian Financial Review, of a phone call with Rio chairman Simon Thompson on the subject on Friday.

There’s no one on that board with any real understanding of the Aboriginal groups who own the country on which they operateBen Wyatt, Western Australia treasurer

Potential Australian candidates for the job include Sandeep Biswas and Mark Cutifani, chief executives of Newcrest Mining and Anglo American, respectively, according to bankers and analysts. Nev Power, the former CEO of Fortescue Metals Group, has also been touted as a successor to Mr Jacques.

Australian politicians and pension funds have been critical of the Rio board’s apparent disconnect with the cultural heritage of Pilbara — an iron ore-rich region that contributes 90 per cent of its earnings — following the Juukan Gorge blasts.

“There’s no one on that board with any real understanding of the Aboriginal groups who own the country on which they operate,” Ben Wyatt, treasurer of the Western Australian state government, told the country’s media. “That, for me, screams risk, and it’s something I am stunned hasn’t been picked up over the years.”

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Mr Thompson has indicated that the appointment of Rio’s chief executive will be based on skills and expertise, not nationality. But the London-headquartered mining group is sensitive to government and investor claims that it has lost touch with Australia’s indigenous communities.

About 70 per cent of Rio’s shares are held by investors outside Australia. Its biggest shareholder is state-run Chinese aluminium producer Chinalco, which owns almost 15 per cent of the miner’s London-listed shares and is unlikely to welcome political interference in the succession process.

“Certainly we hope that there are strong candidates from Australia,” Mr Thompson told the Financial Times in an interview on Friday, before Mr Frydenberg’s comments on Monday. “But it will be more a question of making sure that we have someone who brings a real awareness, understanding and strong sense of value and importance of addressing these key community and heritage issues.”

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Rio, which before Mr Jacques’ tenure was run by Australian Sam Walsh, has appointed Simon McKeon, an Australian non-executive director, as a senior independent director in a bid to assuage critics. It will also establish a new social performance function to try to rebuild its relationship with indigenous communities. 

AustralianSuper, which manages A$182bn ($132.5bn) in pension money, said Mr McKeon’s appointment was a first step in ensuring Rio’s “board is more Australian-focused and has a greater sensitivity to the nation and its cultural identity”.

There has been simmering anger that Rio is headquartered in the UK since the deal that created the company — the merger in 1995 of London’s RTZ Corporation and Australia’s CRA Limited.

Canberra imposed few conditions on the deal — other than that a third of directors had to be Australian — and the centre of gravity for the new entity drifted towards London.

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When BHP announced plans to merge with London-listed Billiton in 2001, Canberra made sure it would not happen again, imposing tough rules on the deal, including that the HQ and CEO must be based in Australia.

Stephen Kirchner, trade and investment programme director at the University of Sydney’s US Studies Centre, said asking Rio to appoint an Australian chief executive was a new development that was consistent with a more protectionist impulse taking hold globally.

“It is very strange to see that the government is commenting on the nationality of the chief executive to be appointed,” added Martina Linnenluecke, professor at Macquarie Business School.