On the eve of one of the most highly anticipated annual meetings of the season, it’s virtually inevitable that Rio Tinto will suffer an embarrassing large vote against its remuneration report.
This will be a protest from major shareholders around the world who were livid over the generous parting gift, valued at $48 million, the Rio board awarded to the former chief executive Jean-Sebastian Jacques.
His resignation was forced by a large angry mob of shareholders who held him largely accountable for the cultural carnage resulting from blowing up indigenous sacred sites in West Australia’s Juukan Gorge.
However, the Rio board saw fit to characterise Jacques and the two other senior executives shown the door following the crisis, Chris Salisbury and Simone Niven, as “good leavers”. This protected a large portion of the trio’s entitlements.
So it’s unsurprising that the mob is still carrying the voting pitchforks.
Already the large proxy advisory firms ISS Governance, Glass Lewis and the UK-based PIRC have recommended against the remuneration report as has the Australian Council of Superannuation Investors.
For the Rio board, it will be the first of two annual meetings it will have to endure over the next four weeks. Given it is the first time the board has faced the mass of angry small shareholders, both are set to be fiery affairs.
As a UK/Australia dual listed company, Rio will hold an annual meeting in London on Friday morning (Friday evening Australian time) and a second meeting in Australia next month.
Both sets of shareholders will vote, with the UK shareholders accounting for two-thirds of the vote and Australian shareholders accounting for the remainder.
There is no two-strike rule on remuneration reports in the UK. This ignominy won’t be felt until the Australian shareholders cast their ballots. The final count on all resolutions won’t be known until both meetings are held.
ISS is the only major firm that has recommended that Rio director Megan Clark’s candidacy for re-election should be voted down on the basis that she is chair of the board sustainability committee.
This could result in Clark receiving a larger than usual vote against her but those that have done a rough numbers count consider that she will be safe.
Numerous Rio large shareholders consider they have already extracted their pound of flesh from the board having successfully seen to the early retirement of its chairman Simon Thompson and fellow director Michael L’Estrange. Thompson has announced he will depart over the next year.
L’Estrange’s reputation was tarnished in the aftermath of Juukan Gorge thanks to his authorship of the board review of the affair.
Clark is one of the longest-serving Rio directors and is considered likely to leave over the next couple of years when the board has been adequately infused with fresh talent.
While all of the Rio board share ownership of the Juukan debacle, there are reasons investors are keen to have Clark remain – primary among them is that once Thompson has departed she is the only remaining director with mining experience, having been at BHP and Western Mining.
She is also one of the few Australian directors on the board at a time when Australian investors are pushing for more local representation.
On a more practical note, once Thompson leaves, there will be three board vacancies. The company has yet to fill the board seat left begging when Canadian David Constable resigned at the end of last year to take the chief executive position at Fluor Corporation.
This suggests the board may be finding it difficult to attract high calibre candidates to enter the Rio hornet’s nest. But the miner’s biggest challenge will be finding a new chairman that will be acceptable to the pitchfork wielding shareholders.
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Source: Thanks smh.com