Canberra has asked Rio Tinto to appoint an Australian as its next chief executive as investors and officials push the mining group to sharpen its focus on a country that generates the bulk of its earnings.
The request by Josh Frydenberg, Australia’s treasurer, follows the Anglo-Australian company’s decision to replace Jean-Sébastien Jacques, chief executive, and two other executives over their role in the destruction of a 46,000-year-old Aboriginal site.
It coincides with the Australian government’s push to tighten foreign investment rules and protect strategic industries, given concerns over deteriorating relations with China and the impact of Covid-19 on supply chains.
“Rio Tinto is one of the great companies of the world with a proud Australian history,” Mr Frydenberg said on Monday. “With the vast majority of its revenue coming from Australia, it is fitting to once again see an Australian as chief executive along with the majority of the board.”
“It was a constructive conversation,” said Mr Frydenberg, whose comments were first reported by the Australian Financial Review, of a phone call with Rio chairman Simon Thompson on the subject on Friday.
Potential Australian candidates for the job include Sandeep Biswas and Mark Cutifani, chief executives of Newcrest Mining and Anglo-American, respectively, according to bankers and analysts.
Australian politicians and pension funds have been critical of the Rio board’s apparent disconnect with the cultural heritage of Pilbara — an iron ore-rich region that contributes 90 per cent of its earnings — following the Juukan Gorge blasts.
“There’s no one on that board with any real understanding of the Aboriginal groups who own the country on which they operate,” Ben Wyatt, treasurer of the Western Australian state government, told the country’s media. “That, for me, screams risk, and it’s something I am stunned hasn’t been picked up over the years.”
Mr Thompson has indicated that the appointment of Rio’s chief executive will be based on skills and expertise, not nationality. But the London-headquartered mining group is sensitive to government and investor claims that it has lost touch with Australia’s indigenous communities.
Rio appointed Simon McKeon, an Australian non-executive director, as a senior independent director on Friday in a bid to assuage critics. It will also establish a new social performance function to try and rebuild its relationship with indigenous communities.
About 70 per cent of Rio’s shares are held by investors outside of Australia. The company so far has rejected overtures from politicians and partners, including Australian billionaire Gina Rinehart, to move its headquarters from London to Perth.
AustralianSuper, which manages A$182bn ($132.5bn) in pension money, said Mr McKeon’s appointment was a first step in ensuring Rio’s “board is more Australian focused and has a greater sensitivity to the nation and its cultural identity”.
Analysts said Canberra’s intervention in a corporate appointment was an unusual step that reflected a trend towards growing protectionism in Australia.
“It is very strange to see that the government is commenting on the nationality of the chief executive to be appointed,” said Martina Linnenluecke, professor at Macquarie Business School.