Mining giant Rio Tinto announced on 11 September that its CEO Jean-Sébastien Jacques and two other senior executives will leave the firm, following fierce criticism over its destruction of a 46,000-year-old, sacred Aboriginal site in Western Australia. (CNN Business, 11 September 2020)
In May, the company blew up a series of cave dwellings at Juukan Gorge in the Pilbara region – shelters that comprised one of the earliest known Aboriginal settlements, which had been more or less continuously occupied. The firm conducted the operation to gain access to a better-quality iron ore than what it had obtained elsewhere in the region.
Public outrage ensued, leading the Australian Parliament to set up an inquiry to examine the rationale behind the decision. In particular, the probe zeroed in on Rio Tinto’s dealings with the indigenous community recognised as the site’s traditional owners. But on 10 September, Queensland MP and inquiry committee chair Warren Entsch accused the firm of providing misleading evidence. (The Guardian, 10 September 2020 )
The same day, superannuation fund Hesta – a major Rio Tinto shareholder that represents more than 870,000 Australians – issued a letter to the firm in the run up to a crucial board meeting in which Jacques’ future would be in the spotlight. (The Guardian, 10 September 2020 )
“Mining companies that fail to negotiate fairly and in good faith with traditional owners expose the company to reputational and legal risk,” Hesta wrote. “These risks increase the longer these agreements are in place. Without an independent review, we cannot adequately assess these risks and understand how they may impact value. We have lost confidence that the company can do this on their own.”
The two Rio Tinto executives who will accompany Jacques through the exit are head of iron ore Chris Salisbury, and head of corporate affairs Simone Niven.
In a statement, the Australasian Centre for Corporate Responsibility (ACCR) described the departures as “the first step” towards Rio Tinto’s rehabilitation. (ACCR Press Office, 11 September 2020)
ACCR legal counsel James Fitzgerald said: “There are in fact two disasters: The first involves the tragic destruction of Juukan Gorge in May; the second is the dishonest malaise of Rio Tinto’s board and senior management in the months since. The first cannot be undone. The damage is irreparable.”
Fitzgerald noted: “Investors have stepped up in this instance and demonstrated that they will not accept corporate misinformation and the absolute disrespect to cultural sites that has become Rio’s modus operandi.”
He added: “The company’s conscientious but beleaguered Communities staff deserve to be supported and encouraged in their important work.”
What should senior teams take away from the implosion of leadership that has occurred at the top of Rio Tinto?
The Institute of Leadership & Management’s head of research, policy and standards Kate Cooper says: “Depending on how you look at it, it’s either quite ironic or quite fitting that Rio Tinto’s name is derived from how the chemical by-products released in its mining activities turned rivers red. So, the history of the firm has never been particularly attuned to taking environmental protection as seriously as it is now being urged to do so.”
She notes: “This story reveals much about the growth of ethical awareness among shareholder communities. For so long, whenever we talked about ethical behaviour or gender inclusivity, corporates reminded us, ‘There has to be a business case.’ And then leadership thinkers pushed back, saying, ‘Actually, the moral case is more important.’ But what we’re beginning to see now is those two things coming together: a strengthening of the view that taking a firm ethical stance is the essence of good business sense.
“Ultimately,” she says, “the people who are taking investment decisions are those who, in recent years, have been made far more aware of the impact that business and consumerism are having on the planet. And there are more and more reminders now within the business world that there are things that we can do about it. So, when people behave irresponsibly – when there is no ethical foundation for what they’re doing, and they seem to be motivated purely by financial returns – backers are more inclined to conclude that it’s just not good enough. And in this case, three senior leaders have paid the price.”
Cooper adds: “This is a potent reminder that ethical business is good business. That’s the message that has emerged from the conscious-capitalism movement over the past few years. But more examples like this – where people are actually held to account for poor ethical practice – will lead to a wider acceptance of the view that business ethics should be driving, or at the very least underpinning, the decision-making process.
“And importantly, there has to be a consistency to all of this. Ethical business must be happening all the time, irrespective of economic conditions, or who’s in charge – because ethics should be the foundation of our decisions.”
For further insights on the themes raised in this blog, check out the Institute’s resources on social responsibility
Image of Rio Tinto HQ for Western Australia courtesy of Rob Bayer, via Shutterstock