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Rio Tinto
Rio Tinto will not strip long-term bonuses from three executives, including chief executive. Photograph: David Gray/Reuters
Rio Tinto will not strip long-term bonuses from three executives, including chief executive. Photograph: David Gray/Reuters

Rio Tinto defends not stripping bonuses from executives who left amid Juukan Gorge outcry

This article is more than 2 years old

In bid to stem shareholder anger, executive pay will now be partly based on compliance with environmental, social and governance issues

Rio Tinto has defended its decision not to strip long-term bonuses from three executives, including the chief executive, who left the company following a community and shareholder backlash after the miner blew up 46,00-year-old rock shelters at Juukan Gorge in the Pilbara.

In a bid to stem shareholder anger, executives at the company will now earn part of their pay based on the company’s compliance with environmental, social and governance issues.

The then chief executive, Jean-Sebastien Jacques, iron ore head, Chris Salisbury, and corporate affairs boss, Simone Niven, left the company in September.

On Thursday, Rio senior independent director Sam Laidlaw told a meeting of shareholders it was clear many stakeholders felt the financial penalties imposed on the three “were insufficient and that to rebuild relationships with traditional owners and other stakeholders, changes of leadership were required to move the company forward”.

He said the board had to balance a number of factors including that there “was no deliberate act or omission to act by the three executives” or “fraud, malfeasance or cover-up” against “a critical risk assessment failure going back many years” that could “be partially attributed to the three executives, who failed to recognise and remediate systemic weaknesses in the heritage risk management process” and “failed to apologise unconditionally, and respond with sufficient empathy towards the [traditional owners] PKKP and to recognise the gravity of what had happened within the wider societal context”.

The three executives forfeited their short-term bonuses – worth more than £1.7m in Jacques’s case – and an additional £1m was stripped from Jacques’s long-term bonus, Laidlaw said.

“Some have suggested that the failure of the three executives to respond appropriately should have resulted in the forfeiture of all outstanding remuneration,” he said.

“The board understands this sensitivity and deeply regrets the destruction of the rock shelters and the slow and initially insufficiently sensitive response of the company.

“Given these considerations, as well as various market precedents, the board concluded that it was not in a position to legally terminate the three executives for cause and forfeit all outstanding remuneration.

“Instead, it was more appropriate that the three executives’ employment be terminated by mutual agreement (acknowledging the potential adverse effect that this may have on their longer-term careers).”

Laidlaw said under Rio’s new pay arrangements, compliance with policy, environmental, social and governance measures would make up 15% of short-term bonuses. This will be achieved by reducing the proportion of bonuses linked to individual performance from 30% to 15%.

“We have also importantly introduced a specific ability to apply malus and clawback if in the future there is a material impact on our social licence to operate,” Laidlaw said.

Rio’s chairman, Simon Thompson, who did not stand for re-election at the meeting due to the Juukan Gorge scandal, and the new chief executive, Jakob Stausholm, again apologised for the decision to blow up one of Australia’s most significant archeological sites.

“The work we have to do at Juukan Gorge is beyond the remediation of the site,” Thompson said.

“We must work in partnership with traditional owners in Australia, Native Americans in the United States, and indigenous people in Canada and elsewhere, to secure our shared future.”

The company is under fire in the US over a joint copper mining venture with BHP, Resolution Copper, that is opposed by Apache people because the proposed mine sits on land containing hundreds of indigenous archaeological sites dating back 1,500 years. Transfer of the land to the joint venture has been paused by the Biden administration.

At the meeting, Rio also endorsed resolutions on climate put forward by two activist shareholder groups, Market Forces and the Australasian Centre for Corporate Responsibility, calling for it to set emissions targets consistent with the Paris agreement and for it to suspend membership of industry organisations that don’t have global heating policies consistent with Rio’s.

Asked if the endorsement of Market Forces’ resolution meant that the company recognised its current approach was not adequate, Thompson said: “Do we need to be more ambitious? I think the whole world needs to be more ambitious in tackling climate change.”

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