Quite what it was doing buying a coal mine in Africa is a question the board members who spent $4 billion on it (it’s now worth $1 billion, at least for the time being) should now be asking themselves. From this point of view, the appointment of Walsh, who has a strong operations record and has worked in the iron ore division for the past 23 years since he joined Rio as a mining novice from the auto sector, makes sense on paper.
But he has very much ridden his luck, or rather the China boom and the soaring iron ore price. The times got so good in China that on Walsh’s watch Rio took its eye so far off the ball in its biggest market that it left the locals in charge – how’s that for corporate governance? There was plenty of noise from staff in its Shanghai and Singapore offices in the year leading up to the arrest of four of its senior salesmen including Australian Stern Hu.
As the scandal played out, diplomatic relations with China (our largest trading partner) sunk to their lowest ebb in decades. Rio’s reputation suffered in a way that even the worst case scenarios in public relations disaster planning could not have imagined. Rio’s initial reaction was to go firmly on the front foot and deny the men were guilty, a lead also foolishly taken by the Australian government (what do you mean, they get their advice from corporate Australia? ) Whoops.
If its initial reaction was hasty, the retreat that the company beat from the employees was breathtaking in its swiftness and finality. Cut loose and left to hang and dry, even before their trials were completed.
The four men admitted to bribery but not to the industrial espionage charge that accounted of about half the jail terms that ran as high as 14 years (Hu is serving 11 years). Rio did not believe that the charges were legitimate but has not lifted a finger publicly to challenge those verdicts, or have the sentences of their former employees reduced.
But even more curiously – and this is where the company’s entire culture comes up hideously short – the buck stopped right there in China with three Chinese employees and their Australian Chinese leader. Not one Rio Tinto executive was blamed for a situation that they created by omission. That’s a situation neither of their rivals BHP or Brazil’s Vale found themselves in. The men who carried the can for what former Australian ambassador to China Geoff Raby – who saw the case up very, very closely on his watch – has correctly called a management failure, are languishing in a Chinese prison. They receive a visit once a month from family.
Even more recently, Rio – like its counterparts but unlike a handful of smart industry analysts –failed to pick the mid-2012 plunge in iron ore prices and its subsequent rebound. You would think that a company might have a better grip on its main business.
Despite a faux heroic decision by either himself or du Plessis to not get a golden handshake or bonus, Albanese will saunter off into the sunset with his saddlebags overflowing with tens of millions of shareholders cash accumulated as he presided over one of the worst acquisitions in corporate history and the greatest self-inflicted scandal any western company has so far suffered in China.
Michael Sainsbury is a Crikey freelance correspondent and editor of Little Red Blog.
This article was first published on LeadingCompany’s sister site, Crikey.
