Rio Tinto has suffered a major revolt by shareholders over the exit package handed to former chief executive Jean-Sébastien Jacques, one of several investor rebellions over pay on a bruising day for UK-listed companies.
More than 60 per cent of the votes cast at Rio’s annual meetings in London and Sydney were against its remuneration report, making it the most significant rebellion this year against a UK-listed company on pay.
Jacques and two of his senior lieutenants resigned in September following an outcry over the blasts at the 46,000-year-old Juukan Gorge site in Western Australia to make way for a mine expansion.
Although Jacques was stripped of bonuses worth an estimated £2.7m, his total pay last year climbed 20 per cent to £7.2m. In addition he was allowed to keep shares awarded under a long-term incentive programme worth more than £27m.
The resolutions put before shareholders, however, are advisory and not binding, although in Australia if a remuneration report draws more than 25 per cent opposition for two years, the board in question has to put itself up for re-election.
The revolt is a blow for Rio’s outgoing chair Simon Thompson and its new chief executive, who have been trying to repair relations with shareholders, damaged by the events at Juukan Gorge almost a year ago.
Although Rio’s was the largest, it was just one of several UK companies to suffer shareholder rebellions.
At drugmaker Indivior, more than 38 per cent of shareholders voted against the company’s pay report, after it maintained bonuses for its former chief executive, despite being jailed for his role in the US opioid crisis. A fifth of shareholders additionally voted against the re-election of Daniel Phelan, chair of the remuneration committee.
Almost a quarter of investors in BAE Systems, Britain’s largest defence contractor, voted against pay at the company over proposals to hand its chief executive an extra £2m to stay, after an attempt from a rival to poach him. About a fifth of shareholders at Vitec also failed to support the small-cap company’s pay report over concerns about payouts.
Shareholders in Genel Energy, the London-listed but Kurdistan-focused oil producer, also staged a protest. More than 42 per cent of votes were cast against the company’s pay policy and there were also sizeable protests against its remuneration report for 2020, plus 2021 share and bonus plans.
Martin Gudgeon, chair of the Genel’s remuneration committee quit ahead of the vote, while its chief financial officer Esa Ikaheimonen also resigned from the board of directors but will retain his CFO role.
The rebellions are the biggest sign yet shareholders are living up to their warnings that they would punish companies that failed to keep pay in check, particularly in light of the pandemic.
At Rio’s shareholder meeting, Norway’s $1.3tn oil fund and the UK’s Local Authority Pension Fund Forum, which manages about £300bn in assets, were among those to vote against the report.
In light of the failed resolutions, Rio said it would engage with shareholders and “reflect” on any “new input” as it implemented the remuneration policy.
In addition to the rebellion on pay, more than a quarter of Rio shareholders opposed the re-election of Megan Clark, chair of its sustainability committee.
Rio said it had weighed up the significant contribution, experience and continuity Clark “brings to the board” and concluded she should remain to “provide stability” at an important time for the company.
Ahead of the AGM, influential adviser Institutional Shareholder Services recommended shareholders vote against the remuneration report, saying Rio should have used its powers to reduce the number of “performance shares” held by Jacques. Glass Lewis, another big proxy adviser, also told its clients to vote against the remuneration report.
Rio has defended the payouts saying the company was not in a position “to legally terminate the three executives for cause and forfeit all outstanding remuneration”.
Thompson said Rio had significantly strengthened its remuneration policy in light of the Juukan Gorge incident, citing the ability to claw back bonus payments if there was a material impact on its social licence to operate.
He said he understood the “outrage” over big payouts to former executives but claimed this was the “unintended consequence” of remuneration schemes in which 70-80 per cent of pay was deferred for five years.
“We are in the strange situation where CEOs receive most of their pay after they leave,” he said.
With reporting by Attracta Mooney and Nathalie Thomas