Rio Tinto advised to beef up its board
After more than $US20 billion worth of impairments over the past 14 months at Rio, the British arm of proxy adviser CGI Glass Lewis has called for the company to review the composition of the board, led by South African Jan du Plessis.
"We remain concerned with the apparent lack of core industry experience and strategic geographical diversity among the independent element of the board," said Glass Lewis, in its report before Rio's annual general meeting for British shareholders on April 18.
The adviser acknowledged Rio's board had good measures of legal, accounting, business and finance skills, but said there was a risk that too few directors could speak with authority on mining issues.
"We believe that additional independent directors with core industry expertise would provide an informed 'check and balance' with management on issues specific to this group's industry," the report said.
"In the absence of non-executive directors well-versed in the resources sector, there is also a risk that management could have a heavy - and unchecked - hand in setting strategy. Given the magnitude of the impairments and asset write-downs by the group in recent years, the need for the board to review its composition ... is of particular importance in ensuring effective oversight over strategic management decisions."
Rio boasts several Australians, notably Mike Fitzpatrick and Chris Lynch, on its board.
Despite the comments, the advisers said they would support all but one of the motions at the upcoming AGM, including new executive remuneration terms.
Rio is in the middle of a major divestment campaign. The Wall Street Journal reported this week Macquarie and Deutsche Bank had been hired to find buyers for several Australian assets, reportedly including thermal coal assets in Queensland and NSW, and the Northparkes copper and gold mine in NSW.
Frequently Asked Questions about this Article…
Proxy adviser CGI Glass Lewis has warned that after more than US$20 billion of impairments in the past 14 months, Rio Tinto’s board may lack core industry expertise and strategic geographical diversity among independent directors, which could limit informed scrutiny of mining decisions and strategic oversight.
The recommendation came from the British arm of proxy adviser CGI Glass Lewis ahead of Rio’s British AGM. They acknowledged the board’s legal, accounting and finance skills but said additional independent directors with core mining industry expertise are needed to provide a stronger check and balance on management.
The article states Rio Tinto recorded more than US$20 billion of impairments over the past 14 months.
Yes. CGI Glass Lewis warned that without non-executive directors well-versed in the resources sector there is a risk management could have a heavy and unchecked hand in setting strategy, especially given the magnitude of recent impairments and asset write-downs.
Despite their concerns about board composition, the advisers said they would support all but one of the motions at the upcoming AGM, including the proposed new executive remuneration terms.
The article notes that Rio’s board includes several Australians, specifically mentioning Mike Fitzpatrick and Chris Lynch.
Rio is in the middle of a major divestment campaign. The Wall Street Journal reported that Macquarie and Deutsche Bank were hired to find buyers for several Australian assets, reportedly including thermal coal assets in Queensland and NSW and the Northparkes copper and gold mine in NSW.
The article says the concerns were raised ahead of Rio Tinto’s British annual general meeting for British shareholders on April 18.

