Rio leadership overhaul aimed at restoring trust, license to operate

Rio Tinto has overhauled its executive leadership in a bid to rebuild trust and social license to operate in the wake of the destruction at Juukan Gorge.

Shareholders and stakeholders noted the moves have to be grounded in a wider change to culture and governance through implementation.

Rio Tinto Chief Executive Jakob Stausholm has appointed a permanent chief executive of Rio Tinto's Iron Ore business, created a chief operating officer (COO) role, and added a chief executive Australia to the leadership team. Simon Trott, currently chief commercial officer, will become iron ore chief executive; copper and diamonds chief executive Arnaud Soirat will become group COO; and Kellie Parker, now managing director Pacific operations aluminium, will join the executive committee as chief executive Australia.

While Rio Tinto continues to deliver strong safety and operational performance, despite the ongoing challenges of COVID-19, there are improvements we can achieve across the business to make Rio Tinto more resilient, and an even stronger performer and employer," Stausholm said. "I want to re-establish Rio Tinto as a trusted partner for host communities, governments and other stakeholders."

In May of 2020, Rio Tinto destroyed a site that represented 46,000 years of culture and history for the Puutu Kunti Kurrama and Pinikura (PKKP) peoples of the Pilbara in Western Australia. Amid global outrage, CEO Jean-Sebastien Jacques, Chris Salisbury, chief executive, and Simone Niven group executive, corporate relations, all announced plans to step down.

In December, the Parliamentary Joint Standing Committee on Northern Australia report, Never Again, found missteps by Rio Tinto, the Australian federal government, the Western Australian government, the PKKP's legal representatives and were let down by native title law.

Rio Tinto has faced significant backlash for the destruction at Juukan Gorge, with institutional investors and asset owners around the world condemning the incident and calling for change.

HESTA, the $56 billion industry fund for health and community services, crafted a statement on working with Indigenous communities and wrote to 14 Australian mining and energy companies on how to manage risks associated with Indigenous heritage protection issues.

HESTA weighed in on the executive leadership changes.

"As a long-term investor, we want to see lasting and significant governance and cultural change," said HESTA CEO Debby Blakey. "While change in the executive team can help achieve this, it's important that we now also see senior leadership and board take substantial action to fully implement the very significant initial recommendations of the Parliamentary Inquiry.

Blakey called for an independent review of all agreements with Traditional Owners.

"Companies that fail to negotiate fairly and in good faith with indigenous communities represents a clear systemic risk to investors," she said. "Without a full, transparent review of these agreements, investors cannot be confident this risk is being managed appropriately."

In addition to the executive changes, Rio Tinto has also reorganised its product groups into aluminium, copper, iron ore, and minerals, which will now also include the diamonds business. In addition to Trott's appointment, Ivan Vella, currently interim iron ore chief executive, will become aluminium chief executive; energy and minerals chief executive Bold Baatar will become copper chief executive; and Sinead Kaufman, currently managing director operations copper and diamonds, will join the executive committee as minerals chief executive.

As COO, Soirat drive company-wide improvements in the Rio Tinto production system during a fixed 18-month term.

The product groups will continue to be supported by the Safety, Technical and Projects Group, run by Mark Davies, which includes the recently established Communities and Social Performance function.

In her role as chief executive Australia, Kellie Parker will focus on rebuilding trust and strengthening external relationships across Australia, Rio Tinto said.

Aluminium Chief Executive Alf Barrios will become chief commercial officer, leading the drive to deliver additional value from mine to market.

Vera Kirikova, chief people officer, will leave. James Martin, currently a partner at Egon Zehnder, will join Rio Tinto as chief people officer in April.

Brynn O'Brien, executive director, Australasian Centre for Corporate Responsibility, called for deep cultural change at Rio Tinto.

"The next three to six months are the critical time for Rio Tinto's refreshed leadership structure and executive committee to demonstrate that they are capable of delivering that change," she said. "Shareholder reservations about board competency remain, and we expect that investors will be looking to the company's AGM in May as an opportunity for renewal."

Brynn further noted that shareholders and stakeholders are looking to Rio to realign its culture and behaviour with human rights and climate commitments.

"Will Rio Tinto respect the wishes of Apache people of Arizona, or will they proceed with copper mining plans that will destroy sites of immense cultural and spiritual value as they did with the Juukan Caves," O'Brien said. "Will the new leadership team put further structure around the company's climate performance? Will they finally take action and deal with the company's legacy issues in Bougainville in a transparent and meaningful way? These are the crucial questions for the new leadership team and investors will be watching developments closely."

Blakey noted that the super fund will continue its engagement with Rio.

"HESTA will continue to engage with Rio on how they intend to improve governance oversight and long-term cultural change, which will inform our share voting at Rio's AGM in May," she said.

Read more: Rio TintoHESTAJuukan GorgeKellie ParkerPKKPJakob StausholmDebby BlakeyBrynn O'BrienArnaud SoiratAustralasian Centre for Corporate ResponsibilityPuutu Kunti Kurrama and Pinikura
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