Rio Tinto rolled, berated and embarrassed

By Stephen Mayne
December 21, 2007

On May 4, 2006, the mighty Rio Tinto was humbled when its own shareholders rejected a new constitution. This is what was sent to Crikey subscribers two hours after the historic meeting.

Rio Tinto, the world's biggest mining company, got pilloried by shareholders, West Papuan refugees and environmental activists at its AGM in Melbourne this morning but, most extraordinarily, normally passive institutional shareholders turned on the board and voted down a resolution to change the constitution.

In one of the worst displays of arrogance I've seen from a company chairman, Paul "I've got a plum in my mouth" Skinner:

  • Had the general debate at the end, after more than an hour was taken up dealing with the 12 resolutions;
  • A show of hands was banned so the mood of the meeting was never captured by the meaningless polls;
  • Refused to disclose any proxy votes, even after the debate was over and despite repeated requests;
  • Refused to disclose the scale of the defeat on the proposed change to the constitution which will never be revealed; and
  • Pretended he didn't know what the problem was with institutions when he must have been told it revolved around limiting the ability of the company from being sued in the US
The biggest news story out of the meeting was the presence of one of the 43 West Papuan refugees who gave a passionate speech about the abuse of indigenous people around the giant Grasberg mine, operated by those cowboys from New Orleans-based Freeport McMoran – Rio Tinto's partner over the past ten years.

Holding 11,000 proxies delivered by an Australian Shareholders' Association member, "Marcus" pleaded with the board to "please help the people of West Papua" in the face of brutal attacks by the Indonesian military. Chairman Skinner and CEO Leigh Clifford returned to this issue on numerous occasions during the meeting and the defences to the refugees and the shouting environmentalists included the following:
  • There's no alternative to dumping the tailings in the river given the mine is at 4,000 metres altitude and all that tropical rainfall;
  • Freeport is a great company, we encourage them to do their best and they even have a former judge on their board;
  • The Catholic Church, along with the US and UK governments, have all signed off on the human rights issues and the company's dealings with the Indonesian government and military;
  • The mine is Indonesia's biggest taxpayer, delivering more than $1 billion a year;
  • Sure, we contribute $5.5 million a year to the Indonesian military but Freeport's private security force at the mine is not armed.
I got up about a dozen times over the 135-minute meeting at the Sofitel and the exchanges can broadly be summarised as follows:
SM: Vote against Sir Rod Eddington's election because he disgraced himself and let News Corp shareholders down by tolerating Rupert Murdoch's deceptive poison pill acrobatics after the move to Delaware.

SKINNER: Sir Rod's a fine fellow who took British Airways "from worst to first". News Corp is nothing to do with us.

SM: Given that Ashton Calvert was secretary of DFAT when Saddam collected most of his $300 million from AWB, will the board take into account the findings of the Cole inquiry?

SKINNER: Ashton's a fine fellow, we consider everything but he hasn't been directly dragged into the inquiry so far.

SM: Well done on dealing with those upstarts from Cazaly Resources over the Shovelenna deposit in WA. Great lobbying of the WA government, but how'd you pull it off?

SKINNER: We just presented the facts, no arm twisting. They'd banked our rent cheque for goodness sake. Of course we should have retained it and were very satisfied with the outcome. No mention of ever actually developing the dirt.

SM: Why don't we get the hell out of the giant Grasberg mine run by Freeport in West Papua? We've made a huge profit, the situation is deteriorating, the Australian government has deemed it unsafe for the 43 refugees to return. We don't need this.

SKINNER: Yes, a very tidy profit indeed. Not going into the detail of any potential sale mechanisms given is an unlisted direct 40% stake in parts of the operation. Freeport is the operator, of course, but I did spend a weekend there last year and everything looks fine.

SM: Stop treating us like mushrooms. History has been made with this resolution being rolled. Tell us the proxies.

SKINNER: Get stuffed!

Now obviously there's a bit of editorial licence on some of this paraphrasing, but it was a most unsatisfactory performance by the chairman and I'm predicting he will deservedly get a bollocking in the media. The news angles were coming thick and fast, so it will be interesting to see which way the media jumps.