Rio Tinto PLC Stock – Rio Tinto suffers huge revolt over pay
Rio Tinto has suffered a major revolt by shareholders over the exit package handed to former chief executive Jean-Sébastien Jacques, who quit last year following the destruction of an ancient Aboriginal site in Western Australia.
More than 60 per cent of the votes cast at the miner’s annual meetings in London and Sydney were against its remuneration report, making it the most significant rebellion this year against a UK-listed company on pay.
The resolutions put before shareholders, however, are advisory and not binding, although in Australia if a remuneration report draws more than 25 per cent opposition for two years, the board in question has to put itself up for re-election.
Jacques and two of his senior lieutenants resigned in September following an outcry over the blasts at the 46,000-year-old Juukan Gorge site to make way for a mine expansion.
Although Jacques was stripped of bonuses worth an estimated £2.7m, his total pay last year climbed 20 per cent to £7.2m. In addition he was allowed to keep shares awarded under a long-term incentive programme worth more than £27m.
The revolt is a blow for Rio’s outgoing chair Simon Thompson and its new chief executive, who have been trying to repair relations with shareholders, damaged by the events at Juukan Gorge almost a year ago.
In light of the failed resolutions, Rio said it would engage with shareholders and “reflect” on any “new input” as it implemented the remuneration policy.
Norway’s $1.3tn oil fund and the UK’s Local Authority Pension Fund Forum, which manages about £300bn in assets, were among those to vote against the report.
In addition to the rebellion on pay, more than a quarter of Rio shareholders opposed the re-election of Megan Clark, chair of its sustainability committee.
Rio said it had weighed up the significant contribution, experience and continuity Clark “brings to the board” and concluded she should remain to “provide stability” at an important time for the company.
Ahead of the AGM, influential adviser Institutional Shareholder Services recommended shareholders vote against the remuneration report, saying Rio should have used its powers to reduce the number of “performance shares” held by Jacques.
Glass Lewis, another big proxy adviser, also told its clients to vote against the remuneration report.
Rio has defended the payouts saying that the company was not in a position “to legally terminate the three executives for cause and forfeit all outstanding remuneration”.
Speaking before the votes were announced on Thursday, Thompson said the board felt the decision to strip Jacques and the two other executives of a total of £4m in bonuses after the incident was “appropriate” in the context of them “forfeiting their jobs”.
He said Rio had significantly strengthened its remuneration policy in light of the Juukan Gorge incident, citing the ability to claw back bonus payments if there was a material impact on its social licence to operate.
Thompson also said he understood the “outrage” over big payouts to former executives but claimed this was the “unintended consequence” of remuneration schemes in which 70-80 per cent of pay was deferred for five years.
“We are in the strange situation where CEOs receive most of their pay after they leave,” he said.
The vote against pay at Rio, which is listed in London and Sydney, easily ranks as the biggest shareholder revolt at a UK annual meeting so far this year.
It follows a bruising month for UK plc, where investors punished companies from Glencore to British American Tobacco over executive remuneration.