Paul Holmes 15 Sep 2020 // 3:59AM GMT
SYDNEY—On Friday of last week, Anglo-Australian mining giant Rio Tinto announced the departure of three executives—including its CEO and its most senior public relations executive—amid an outcry over its destruction of a 46,000-year-old Aboriginal heritage site in Western Australia.
In the wake of criticism that the company had not initially taken the resulting crisis seriously, chief executive Jean-Sébastien Jacques was forced out, along with Chris Salisbury, the head of the company’s iron ore business, and group executive, corporate affairs, Simone Niven, who had responsibility for external affairs — including indigenous affairs — sustainability approach, communities, brand, media, government affairs and employee communications.
The departure of the three executives — officially by mutual agreement — was an unusually resounding victory for stakeholders who had demanded that the company take dramatic action, and for shareholder activism in Australia. Says Iain Twine, former vice chairman of Edelman and now founder and managing partner of Harrup Advisory: “Superannuation funds in Australia look after trillions of dollars of people’s savings and despite lucrative returns, most Australians don't want to stand by and see the indigenous community lose out on the back of a comfortable retirement for the rest of us.”
The outcry began in May, when the company, seeking to expand its giant iron mine in the region, destroyed an Aboriginal site at Juukan Gorge in the Pilbara region, where evidence of human habitation dates back 46,000 years—the only inland site in Australia showing human occupation continuing through the last Ice Age.
Perhaps the most remarkable aspect of the incident was that it was entirely legal. Rio Tinto obtained permission to mine in the area in 2013, and although an archaeological dig just a year later unearthed incredible artefacts, such as a 4,000-year-old plait of human hair, providing evidence that the site was much older than originally thought, Australia’s ABC network reported that the company’s right to mine “was not affected by the discovery of ancient artefacts."
As The Conversation health and medicine reporter Clint Witchalls wrote, “The history of large developments destroying Indigenous heritage sites is, tragically, long.” He cited a $2.1 billion light rail line in Sydney, completed last year, which destroyed a site of more than 2,400 stone artefacts, and the ongoing threat to ancient rock art on the Burrup Peninsula in north-western Australia from a large gas project.
There is a process that allows companies to apply to the government’s Aboriginal Cultural Material Committee for consent to proceed with developments likely to damage Aboriginal lands, but as Witchalls notes, “The biggest concern with this act is there’s no statutory requirement ensuring traditional owners be consulted. This means traditional owners are left out of vital decisions regarding the management and protection of their cultural heritage.”
But the timing of Rio Tinto’s actions was particularly bad. The destruction of the ancient site occurred just days before Reconciliation Week, “a time for all Australians to learn about our shared histories, cultures, and achievements, and to explore how each of us can contribute to achieving reconciliation in Australia,” which the company marked with a a 90-second Twitter video touting its “lasting, positive impact” on the world and promising: “As we look to the future, we will do our part. Because we’ll always be in this together.”
Not only that, but this was the same week that the death of George Floyd at the hands of the Minneapolis Police Department reignited the Black Lives Matter campaign and turned it into a global movement, with thousands taking to the streets in Australia.
Despite the immediate anger, Rio Tinto’s early response fell far short of what was needed. The company initially claimed the incident was a “misunderstanding”, suggesting it was not made aware of the cultural significance of the site by the traditional landowners. But the BBC reported that " in the days running up to the caves' destruction in May, Rio Tinto hired lawyers from MNC firm Ashursts in case opponents tried to seek injunctions to stop them," suggesting the company was aware of the site’s significance.
In addition to legal counsel, Rio Tinto's external support has also included Australian corporate PR firm Cannings Purple, although it is unclear if the latter played any advisory role during the current situation. "We maintain confidentiality on all client work," said Cannings Purple MD Warrick Hazeldine, whose firm also counts the Noongar Chamber of Commerce and Industry (which represents Western Australia's Noongar people) as a client.
A month after the destruction in Juukan Gorge, the company issued an apology and said it would support strengthening legal protections for Aboriginal heritage sites.
Jacques, who had been the target of criticism after he took two weeks to make his first public comments on the demolition, appeared before a parliamentary inquiry last month and insisted he did not know of the importance of the caves prior to their destruction. But amid continued dissatisfaction among shareholders including large Australian pension funds and some small UK investors, the company then said it would deduct a total of £4 million from the bonuses of Jacques, Salisbury and Niven but insisted they were the right people to help the company rebuild its reputation.
Three weeks later, the executive departures were announced, with a statement that finally seemed to strike the right note of contrition. According to Simon Thompson, Rio Tinto chairman, “What happened at Juukan was wrong and we are determined to ensure that the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio Tinto operation. We are also determined to regain the trust of the Puutu Kunti Kurrama and Pinikura people and other traditional owners.
“We have listened to our stakeholders’ concerns that a lack of individual accountability undermines the group’s ability to rebuild that trust and to move forward to implement the changes identified in the board review,” he added.
The decision was hailed as a landmark for shareholder activism in Australia. “Shareholder democracy and investor action is alive and well in Australia,” said James Fitzgerald, legal counsel at the Australasian Centre for Corporate Responsibility. “Corporate captains may think twice before attempting to mislead investors, not to mention a parliamentary inquiry, in future.”
Jamie Lowe, the chief executive of the National Native Title Council, which advocates for Australia's traditional landowners, welcomed the company’s actions, but added: "We do fear that if this is the behaviour of a company thought to have sector-leading standards, what is the risk another Juukan Gorge-type incident will happen again, without sector-wide reforms?"
But not everyone was satisfied with the three departures. “While we welcome the steps taken by Rio today, changes in senior leadership should not distract from the need for an independent and transparent review of all current agreements between the company and traditional owners,” said Debby Blakey, chief executive of the pension fund HESTA.
According to Craig Badings, Sydney partner of trans-Tasman corporate affairs specialist SenateSHJ, “Rio is the tip of the iceberg in terms of shareholder activism coming of age.” But HESTA’s call for all Indigenous contracts to be independently reviewed suggests new challenges for public relations and issues management pros going forward.
“Issues management is lagging the evolution of shareholder activism,” says Badings. “In the case of Rio, and countless other corporate crises, company risk lies, often, at the door of company culture. The old expression 'culture is set by what you are prepared to walk past'—or in Rio's case 'blast past'—was never truer.”
Adds Twine, “There will be a lot of work and impact reviews across the Australian mining industry as a result of this. Even though the demolition was apparently legal, it isn't right and activist investors got their way in the end. Australia's indigenous community just wants a fair go and are rightly fed up with this type of behavior.”
The departure of Niven, a 12-year veteran of Rio Tinto, triggered the creation of a new social performance function at the company, headed by Mark Davies, who was previously vice president of corporate procurement and most recently group executive, safety, technical and projects, with a focus on maintaining the company’s commitment to safety, health and the environment.
It remains to be seen whether the new function will go far enough. Badings, for one, believes that Rio Tinto and other companies need to transform not just their corporate affairs approach, but their entire corporate culture.
“It is precisely the gap between what was legally right to do and the right thing to do that was Rio's undoing and why their reputation is now tarnished the world over. It is a symptom of a degraded culture and a failure of leadership,” he says.
“The new face of issues management lies firmly in how tightly the company manages the behaviours that shape their culture and how closely it aligns with the values and purpose of the organisation now and into the future. Management teams will need to deliver even greater clarity on expectations around culture and how they manage the behaviours which reflect it.”
Additional reporting by Arun Sudhaman