Rio wants executives to hold more shares
The proposed changes, which will be put to Australian shareholders at its annual meeting in May, were revealed on Friday night alongside new figures revealing the amount of tax paid by the company last year.
According to the company's Taxes Paid report, Rio paid $US8.9 billion ($8.6 billion) worth of taxes to Australian governments in the 2012 calendar year, despite controversy over the fact the company paid nothing under the Gillard government's mining tax.
The payments to state, federal and local governments dominated Rio's global tax payments, which topped $US11.6 billion before refunds of $US2.9 billion last year.
Rio confirmed last month it had not paid any mining tax in 2012 and was shielded from further payments to the tune of $US1.2 billion in deferred tax credits.
Friday's report hinted that that shield, plus deductions for royalties paid to states, had helped keep mining tax payments at zero.
Rio's AGM will take place in Sydney on May 9.
Shareholders will be asked to vote on a new long-term incentive plan for its executives which, among several changes, will judge the performance of executives over five years rather than four.
Measures of "total Shareholder Return" would be changed under the newly proposed system, with a greater weighting to be given to how Rio's earnings before interest and tax compares to a peer group of 10 big miners.
The new system would also require the chief executive to hold shares worth four times his or her base salary; at present the rules require the chief executive to hold double his base salary in shares.
A clawback provision will allow directors to reclaim awards within two years of their release to workers, and the maximum face value of awards would be 438 per cent of base salary.
It was unclear whether that clause was inspired by the fact that deposed chief executive Tom Albanese was given performance awards granted in 2009 and 2010 despite his biggest error - the disastrous Alcan acquisition - occurring in 2007.
Those 2009 and 2010 bonuses were included in Mr Albanese's total remuneration figure for last year, which Rio on Friday estimated to be worth about $6.3 million.
Rio said that no termination payments would be made to Mr Albanese, but the company would cover medical insurance for him and his wife, who are soon to return to their native US.
Frequently Asked Questions about this Article…
Rio Tinto is proposing that top executives hold more company shares. Under the new rules the chief executive would be required to hold shares worth four times his or her base salary, up from the current requirement of two times base salary.
The proposed clawback provision would allow directors to reclaim awards within two years of their release to employees. The proposal also sets a maximum face value for awards at 438% of base salary.
Shareholders will be asked to approve a new long‑term incentive plan that judges executive performance over five years instead of four. The plan would also change Total Shareholder Return measures, giving greater weighting to how Rio’s earnings before interest and tax (EBIT) compare with a peer group of 10 big miners.
Rio Tinto will put the proposed changes to Australian shareholders at its annual general meeting (AGM) in Sydney on May 9, when voters will be asked to approve the new long‑term incentive plan.
According to Rio Tinto’s Taxes Paid report, the company paid US$8.9 billion (A$8.6 billion) in taxes to Australian governments in the 2012 calendar year.
Rio confirmed it did not pay any mining tax in 2012. The company said it was shielded from further mining tax payments by about US$1.2 billion in deferred tax credits, and the report hinted that deductions for royalties paid to states also helped keep mining tax payments at zero.
The article noted that Tom Albanese’s 2009 and 2010 performance awards were included in his total remuneration figure for last year, which Rio estimated at about A$6.3 million. Rio said no termination payments would be made to Mr Albanese, but the company would cover medical insurance for him and his wife as they return to the United States.
The proposed changes aim to align executives with shareholders by increasing required share ownership (CEO holding four times base salary), extending the performance measurement period from four to five years, weighting incentives more toward EBIT versus a peer group of 10 big miners, and introducing a two‑year clawback on awards. These measures are designed to tie executive rewards more closely to longer‑term company performance.
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