Next month BHP Billiton is set to oppose a bid for a position on its board by former coal executive and now environmental activist Ian Dunlop.
BHP chairman Jac Nasser has told shareholders: “The addition of a director whose focus is primarily on a single issue will not add to the effective governance of the business.”
At the first AGM in London last week (BHP is listed both on the London Stock Exchange and the ASX), Ian Dunlop only secured 4 per cent of the vote. However major international investors are not happy with Jac Nasser’s recommendation to vote against Dunlop, and Australian investors will have a chance to express their views at the Perth meeting on November 21.
'Single issue directors' are very problematic for companies as they can divert attention from core business issues, and fail to live up to their fiduciary duties.
Directors’ duties are fundamentally to pursue the success of the company, and to serve the best interests of the company, acting collectively and responsibly exercising care and diligence, and in good faith, avoiding conflicts of interest.
But environmental responsibility and the pursuit of sustainability is a core business issue for BHP and all resources corporations.
As the former chief executive of the Australian Institute of Company Directors, Ian Dunlop understands directors’ duties. And, having served as chief executive of a number of oil and gas companies with Royal Dutch Shell over the last three decades, is well qualified for a board position with an international resources business.
So what then is the problem? Why is BHP dead set against such an experienced candidate?
The answer lies in Ian Dunlop’s urgent view of the environmental danger facing the world if we do not take immediate steps to reduce carbon emissions. He recently stated “The difference between 2 degrees and 4 degrees of global warming is basically human civilisation”.
In the cloistered corridors of BHP, the largest resources company in the world, the idea that a former chief of coal and gas companies could have become committed to zero emissions, and the end of fossil fuels, must be something of a shock.
Dunlop argues the institutional and corporate complacency that has descended on both government and big business on the real and immediate danger of climate change needs disturbing.
“Climate change is not seen as a strategic risk for this organisation, and I believe it should be, and I don’t think the directors are meeting their fiduciary duty unless they start to change the way they think about it,” Dunlop insists.
The world’s largest miner has publicly expressed a knowledge of the importance of sustainability and a willingness to do something about it in its huge annual sustainability report.
On its website BHP claims: “Environmental and social performance is critical to our success. We are transparent about our sustainability commitments, standards and performance requirements…”
If this is so why not add to its board someone with both considerable experience of the resources industry, and significant environmental roles that include membership of Mikhail Gorbachev’s Climate Change Task Force?
Dunlop’s environmental leadership does not seem to align with BHP’s narrow interpretation of sustainability. As Upton Sinclair once said: “It’s difficult to get a man to understand something if his salary depends on not understanding it.”
According to a report by Carbon Tracker and the London School of Economics, the largest fossil fuel companies spent a total of $US674 billion finding and developing new high carbon assets which may never be used.
Meanwhile, the total global investment in renewable energy sources in 2012 was only $A281 billion.
This is the contradiction that investors internationally have to resolve: that the resources companies are continuing headlong to invest in fossil fuels, when the Intergovernmental Panel on Climate Change and the International Energy Agency has insisted that if global warming is to be limited to 2 degrees, we will need to reduce our carbon emissions, and a large part of proven fossil fuel reserves will need to remain in the ground.
The resources industries are massively investing in fossil fuel development which we can not use, and relatively neglecting renewable energy which we need desperately.
Corporate governance can no longer be separated from corporate social responsibility and sustainability as BHP seeks to do. The integration of governance and sustainability is an essential and urgent task; the greatest materiality of our economic existence is to discover how to recover our ecology while maintaining our human existence and quality of life.
BHP is in a great position to make a massive contribution to this huge endeavour, if it has the courage and vision to do so.
Thomas Clarke is a professor at the Centre for Corporate Governance at the University of Technology, Sydney
Thomas Clarke does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.