Outraged investors have forced the Rio Tinto Board to fire its chief executive Jean-Sebastian Jax With two senior executives partially responsible for the destruction Johann George Caves In the Bilbara region of Western Australia, there was evidence of human habitation 46,000 years ago.
Why did the company do this bad thing Cultural curiosity? There are many layers to the answer.
First, the iron ore division of Rio Tinto was under intense production pressure.
The iron ore near the caves was of the highest quality and the company needed as much as possible to mix with other grades in order to provide the market with its trademark. Bilbara compound.
Its reputation as a reliable supplier depends on it.
Rio Tinto was sailed
It is authorized to mine the area under Western Australian law, although it is intended to exercise this legal right regardless of any objection, although it will destroy the caves.
Second, Rio has a segregated corporate structure.
Its product divisions – iron ore, aluminum, copper and diamonds, ores and energy – operate as autonomous trading units with relatively little control from the corporate center.
When things go right, such a corporate system is very profitable for the company as a whole because it leaves every product segment free to take advantage of any opportunities in its particular market.
But there is a downside. This makes the company vulnerable to bad decision making by any product segment, which can have threatening human and environmental consequences. Social license Of the whole company.
That is exactly what happened in the case of Johann George.
Of course, Rio was aware of this disadvantage of its organizational structure and took action to overcome it.
It had various functional lines – command chains – outside the product divisions, with some control over the delivery of services to the divisions and their decision making.
At the bottom end of these chains sat an executive on the company’s board of directors, both within and above the product divisions, i.e. at the same level as the heads of the product divisions.
These executive managers were in a position to challenge the product division leaders about the decisions they make.
One of these external activities was called communities or indigenous relations. It consisted of staff located within the Rio Tinto Iron Ore, whose job was to assess and manage the company’s impact on tribal people and to negotiate with them to access land where needed.
The command chain for this process went up to an executive for corporate relations, on the company’s board of directors. Corporate relations do not always have a seat at this table. For decades it informed the leader of the two Human resources or legal, Both sit on the board.
Domestic Relations ‘Corporate Relations’
When Jax became CEO in 2016, he was promoted to CEO of Amara Corporate Relations on the Board of Directors. “To ensure that the ‘Social License’ areas are reflected as a special area around the Board “.
Theoretically, this activity should have been able to pass the word about the impending destruction of the Johann George Caves, so that the administrator or chief executive for corporate relations might have intervened.
This did not happen. The function that was supposed to act as a monitoring group in this situation failed to do so.
The explanation is part of how the board is structured. It includes everyone who reports directly to the CEO.
If every functional area in this group is directly represented it makes the work of the CEO very efficient, and therefore only the most important ones.
The less important parts are grouped together and collectively represented.
This means sending a signal of the executive committee’s cosmetic comparative importance.
It consists of the heads of four product divisions, the head of human resources, the chief legal adviser, a chief business officer, a chief financial officer, and a chairman for a committee consisting of development, innovation and health care and the environment. , And Simon Niven, the London-based head of corporate relations, is now leaving.
This is a panel of direct reports to the CEO.
This means that indigenous relations are not directly mentioned at this level. It is compiled with many specialties in a portfolio managed by corporate relations.
That portfolio includes external affairs, sustainability, communities (indigenous relations), brand, media, government affairs and employee relations.
This is a huge amount of worries, each of which is very demanding.
Domestic relations must compete with all these other concerns for the attention of the head of corporate relations, and it is not surprising that it has not always received the attention it deserves.
In fact, Niven had never heard of the Johann George Caves A few days before the destruction Even then, she was unaware of the caves’ extraordinary significance or age.
The situation was bad.
His direct statements did not include anyone responsible for his commitment to Indigenous relations.
Those with a specific responsibility for Indigenous relations in Rio’s iron ore operations in Australia reported to an Australian head of Australian company, who reported to the world leader.
This Australian leader, like his global boss, had a variety of concerns, which meant that Indigenous relations were difficult to get the attention they deserved. Also, looking at his resume at a glance, tribal relations were not a significant part of his professional experience.
The global head of corporate affairs had a primary reporting tax, and the Australian head had a secondary or dotted reporting tax Rio Tinto iron ore head.
As head of the Indigenous Relations process, it would have been his role to raise the matter of Juan George to the senior leadership of the Iron Ore even before preparations began to explode the region.
However, he seems to have had very little awareness of the issue, which he himself explained at a meeting Three days before the blast. Still, the briefing paper “Identifies the exceptional importance of sites or their age “.
In short, the functioning of Indigenous relations failed to alert the higher administration because it had lost its influence. Swallowed A corporate relationship operates with very extensive money. This is the fourth and most important stage of interpretation.
Did Rio learn its lesson?
The changes announced by the Rio Board claim to have learned this lesson.
First of all, it’s a “Social performanceThe reporting function for an executive will be established on the corporate management board.
Social performance is broader than indigenous relations, but it focuses more on the rights of people affected by the project than the broader concept of corporate relations.
Second, the panel notes that the relevant management preference is heath, safety and environment and the culmination for technology and projects.
Adding “projects” can be a serious drawback because that stock is productive. This contradicts the drive for health, safety and environmental and social performance roles, which aims to ensure that these issues are sacrificed for the benefit of production.
Third, community performance employees will be “embedded” within the local mining administration as part of a specialized process of reporting to the management team.
Within the Rio Tinto Iron Ore they will have secondary report lines that will help them exert more influence than ever before.
The important question is whether the social performance function retains its identity above the hierarchy.
In particular, it will be chaired by a corporate social performance expert who responds directly to the relevant executive on Rio’s board of directors.
Otherwise, social performance will be swallowed up as it was before Indigenous relations.
Companies tend to implement major organizational changes after a disaster that affects the entire organization.
The Johann George thing, Other things, A corporate public relations disaster for the entire company.
It is time to correct the organizational mistakes that contributed to it.
If Rio Tinto fails to effectively implement the lessons learned, it will be in vain to sacrifice its three company leaders to satisfy investors.
Andrew Hopkins is a professor of sociology at the Australian National University and Tina Kemp is a professor and director of the Center for Social Responsibility at the University of Queensland. This article first appeared Conversation.