Jean-Sébastien Jacques was battling right to the very end to stay at the helm of Rio Tinto.
After enduring a two-week hotel quarantine in Perth, the hard-charging chief executive of the Anglo-Australian mining group managed to secure a meeting this week with the Puutu Kunti Kurrama and Pinikura people — traditional owners of an ancient Aboriginal site the company blew to smithereens in May to expand an iron ore project.
But his apology was not enough to save his job and that of two deputies who stepped down on Friday as Rio scrambled to draw a line under an incident that has shredded its reputation as one of the world’s great mining companies and underscored the growing power of socially responsible investing.
“It has become clear that the issue of individual accountability is hindering our ability to start the process of rebuilding trust and to move forward,” Rio chairman Simon Thompson told the Financial Times.
That promises to be a long and difficult process and one likely to fall on the shoulders of an outsider, given there is no obvious internal successor to Mr Jacques. Potential candidates include Sandeep Biswas, chief executive of Newcrest Mining, and Anglo-American’s highly rated Mark Cutifani, according to bankers and analysts.
Pressure for action has been building on Mr Thompson, a former investment banker and Anglo American executive, since an internal review into the blasts, which destroyed two 46,000-year-old rock shelters in the Pilbara region of Western Australia — home to Rio’s huge iron ore business.
Published just over two weeks ago, the report found Mr Jacques, head of iron ore Chris Salisbury and corporate affairs boss Simone Niven were “partially responsible” for the demolition.
But rather than fire any of them, Rio’s board decided to impose financial penalties, sparking a shareholder revolt that culminated in Australia’s sovereign wealth fund this week telling Mr Thompson that heads needed to roll. Two former Australian prime ministers also joined the chorus of disapproval, with one renaming the company “Rio TNT”.
Although Rio had the legal right to demolish the caves and a mining agreement with the traditional landowners, critics say the company should have realised the significance of the site. A 2018 report commissioned by the company said the rock shelters had the potential to “radically change our understanding of the earliest human behaviour in Australia”.
But Rio pressed ahead with the blasts to access a $97m iron ore deposit — a sum dwarfed by the $4.75bn in underlying earnings the company reported in the first half of 2020.
The response to the incident was misjudged from the start. Mr Jacques was silent for weeks after the blast, while Mr Salisbury made a less than fulsome apology during a staff town hall meeting.
When Mr Jacques did break cover to appear before a parliamentary committee, it raised more questions than answers. MPs were incredulous when he claimed to have been unaware of the cultural significance of the site.
A brusque character who once told a staff meeting that employees stuck in the past could either “fit in or fuck off”, Mr Jacques was Rio’s youngest ever boss when he took the helm aged 44 in 2016. But the France-born executive was never embraced by Australia’s media or investment community, where there is resentment that the company is run from London.
During his four-year tenure, Rio handed almost $40bn of cash to shareholders through dividends and share buybacks, helping the dual-listed company outperform arch-rival BHP and deliver total returns of 183 per cent and 229 per cent to London and Sydney shareholders, respectively, according to Reuters data.
As well as his single-minded focus on returns, Mr Jacques won plaudits for avoiding big deals and making a well-timed exit from coal. Rio also had an excellent safety record under his watch, going 18 months without a fatality.
But those achievements counted for little in an era where the concerns of big investors extend beyond returns and profit to environmental, social and governance issues.
Mining by its nature involves altering the environment. Rio’s ability to keep paying bumper dividends depends on its ability to replace the iron ore it mines from new deposits. The challenge is to do it in a way that is sustainable and acceptable to local communities.
Analysts fear that could become a more onerous process as regulations are tightened in the wake of the scandal.
Mr Jacques was well aware of the importance of community relations and maintaining the industry’s “social licence” to operate. He was angered by miners’ portrayal as environmental vandals, telling investors in 2018 that comparisons with the baddies in the movie Avatar made him “mad”.
However, former employees say a corporate restructuring ordered by Mr Jacques, in which direct line accountability for Aboriginal engagement and heritage protection was taken away from mine managers and placed under Rio’s corporate affairs unit, meant several opportunities to prevent the blasts were missed. In a submission to the parliamentary inquiry, Rio stated that indigenous relations were “no longer about anthropologists running around a field”.
The Juukan Gorge incident has also exposed other issues at Rio. Mr Jacques will not leave the company until the end of March or until a successor is found.
All the internal candidates that could fill his shoes have left the company, including Alan Davies, the former head of Rio’s energy and minerals division.
Mr Davies was fired along with Rio’s legal head a few months after Mr Jacques took the reins, following a leak of emails detailing payments made by the company to a consultant in Guinea. Mr Jacques was blamed by people inside and outside the company for referring the matter to US and UK regulators, and creating a climate of fear inside Rio.
Friday’s shake-up has also put the spotlight on Mr Thompson, who was appointed in 2018 after investors torpedoed plans to install former Xstrata boss Mick Davis as chairman.
His judgment has been called into question after he publicly backed Mr Jacques and the other executives following the publication of the internal review, saying they were the right people to lead Rio’s response.
The UK Local Authority Pension Fund Forum said the fact that Mr Jacques could remain in place to March 2021 and walk away with around £30m in shares, salary and other benefits was a cause for concern.
“Going forward, board composition is absolutely critical for Rio Tinto to regain trust with investors and communities,” said LAPFF chair Doug McMurdo.
Meanwhile, Hesta, which manages A$52bn in funds, said it was seeking the support of major global investors to “strongly encourage” Rio to launch an “independent and transparent review” of all current agreements between the company and traditional landowners.
“The nature of these agreements and how they are negotiated represents a systemic risk for investors that will not be mitigated by executive changes,” said Debby Blakey, Hesta chief executive. “The board has yet to adequately demonstrate to investors that they have appropriate governance and oversight arrangements in place to manage this risk.”
Asked by the FT if he was considering resigning, Mr Thompson brushed aside the question, saying he was “absolutely committed to ESG issues”.
“There is absolute determination to put this right,” he added.
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