Rio's grand inquisition

When this episode in Rio Tinto's history is eventually chronicled, Jan du Plessis will emerge as the hero who stabilised the group and acceded to his shareholders' wishes while maintaining its independence. His short-lived predecessor, Jim Leng, will no doubt also get an honourable mention. Paul Skinner, who led Rio to the brink and into Chinalco's temporary embrace, may end up be depicted as the villain.

It was the chairman-elect Leng who, at his one and only board meeting, argued that a financial problem dictated a financial rather than strategic solution and advocated a rights issue to all shareholders rather than a comprehensive deal with one party done under duress.

It was du Plessis who pledged that he would listen to his shareholders and who put the historic rivalry between Rio and BHP, London and Australia, to one side to give a dispassionate hearing to the joint venture proposal from BHP. He focused purely on shareholder value.

Skinner, more of an executive chairman than a hands-off non-executive, is blamed by many in Rio for driving the group to the edge of the precipice, primarily to escape BHP's clutches.

Rio has traditionally been the most conservative of the major resource houses. For a quarter of century, through commodity and economic cycles, there has been no significant blemish on its corporate CV.

The Alcan acquisition may have been strategically sound (although the performance of Rio's aluminium businesses suggests the timing wasn't) but the motivation, value and financing were flawed.

Rio, uncharacteristically, paid way over the market – it outbid a natural owner in Alcoa by about $US10 billion – to acquire Alcan, not longer after BHP had made its first approach advocating a merger. The obvious suspicion was that Rio acquired Alcan to try to escape BHP.

It then completely debt-funded the $38 billion deal, introducing a level of leverage and risk to its balance sheet that was also completely out of character, perhaps as a secondary defence against BHP.

And then it refused to engage with BHP. That could have been tactical, but was reflective of Skinner's disdain for the concept of a transaction that would have seen the centre of gravity for Rio's affairs shift from London to Melbourne.

How much of the damage done to Rio was Skinner's responsibility and how much rests on the shoulders of CEO Tom Albanese isn't clear, although Rio insiders make it clear they apportion most of it to their former chairman. Albanese's fate, and that of other senior executives, will presumably be decided by Jan du Plessis once the stabilisation of Rio has been completed and the group can go back to being the disciplined and cautious group that it was in the past.

Du Plessis is said to be quite a modest man, not driven by any obvious element of hubris. He is self-evidently more open-minded than Skinner, although he didn't have the legacy decisions to defend. Apparently he and BHP's Don Argus get along well – they are both pragmatic men.

He will emerge from this episode with enormous support from his shareholders and a mandate to reshape the Rio board and senior management, if he so wishes.

Interestingly his first addition to the Rio board, announced today, was the elevation of Rio's well-respected head of iron ore, Sam Walsh. Walsh, who led the negotiations with Chinalco, will also be the inaugural chairman of the proposed joint venture with BHP.

That adds hands-on resource experience, and an element of the old CRA that has been missing from the Rio board and most senior management, since former CEO Leigh Clifford left the group, not long before the ill-fated acquisition of Alcan.