Board to face pressure at AGM

Rio Tinto shareholders could use today's annual general meeting to push for a major overhaul of the company's board.

Rio Tinto shareholders should use today’s annual general meeting to force a major overhaul of the company’s board, Australian Shareholders’ Association (ASA) consultant Duncan Seddon told MINING DAILY.

“We have taken the view that the board should be cleared out,” Seddon said.

“(Chairman) Paul Skinner is going, and we are going to vote against all of the others who are up for re-election.”

According to Seddon, the Rio board has made too many mistakes and has not acted in the best interests of its shareholders.

“You can forgive one or two mistakes, but there has been more than that,” he said.

“We have Alcan being purchased at a 50% premium, money borrowed on terms from the bank which have proved extremely onerous, and we have had the rejection out of hand of the BHP approach, without its reference to shareholders.”

The approval and subsequent resignation of chairman designate Jim Leng is another of the board’s mistakes, Seddon said.

“The Leng incident was proof that the board was dysfunctional and not doing its job,” he said.

“When it comes to the directors we have taken the view that the board has not served its small shareholders, the retail shareholders, particularly well.”

A key problem with Rio’s board is that many of its members are dedicated to positions with other major companies, Seddon said.

“The board comprises many people, most of whom in the past we have voted against for re-election on the grounds that they are over committed,” he said.

“For instance, the major independent shareholder, Andrew Gould, is a full time chief executive of Schlumberger Limited, a company which is bigger than Rio.

“These guys are fully committed and they shouldn’t be spending 30 to 40 days a year on other people’s business.”

Despite Rio’s proposed US$19.5 billion investment with Chinalco not being on the agenda at today’s meeting, the ASA will take a position on the deal.

“Our current position is that we will oppose it on corporate governance grounds,” Seddon said.

“Our sticking point is the fact that as an 18% shareholder, if they exercised all of their options, Chinalco would appoint two directors who cannot be removed by an 82% vote against.”

Another sticking point for the ASA, according to Seddon, is the fact that the resolution will not be passed separately in both the UK and in Australia, meaning that Tier 1 Australian mining assets are being sold from overseas.

“Because they dominate the share registry, it is the UK selling Australian assets to China,” he said.

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