Rio Tinto’s cultural fix will be an uphill dig
LONDON, Feb 2 (Reuters Breakingviews) - Who’d want to be a miner? On top of dusty, dangerous work in distant locations, many have to endure a culture of bullying, discrimination and abuse, based on the shocking revelations from Rio Tinto’s (RIO.AX), (RIO.L) staff survey. Yet the $117 billion firm’s valuation implies such toxicity matters little to investors. That makes new Chief Executive Jakob Stausholm’s necessary cultural revolution all the harder.
The report, released on Tuesday, is another nail in the reputational coffin of Stausholm’s predecessor, Jean-Sébastien Jacques, who departed after presiding over the destruction of 46,000-year-old Aboriginal caves in 2020. As with an alcoholic facing up to self-destructive behaviour, Rio’s public confession could be an important first step to recovery. The shock factor – including 21 attempted or actual rapes in the past five years – also gives the Dane plenty of impetus for change.
The good news is that workplace reform is possible, even in an industry with as entrenched a hard-man image as mining. Take safety. In 1994, the year apartheid ended, 632 miners were killed on the job in South Africa. Thanks to a “zero harm” push by management, unions, investors and regulators, the figure in 2019 was 51. And Stausholm has ample cash to throw at the problem: $1,000, say, of cultural awareness training for each of Rio’s 47,000 staff would lop just 0.21% off this year’s $22 billion of forecast operating profit, per Refinitiv data.
The bad news for Stausholm is that it took 25 years to get to an imperfect conclusion in South Africa. Nor are the improvements set in stone. In 2021, the country recorded 74 mine-related deaths.
It’s also not clear that Rio’s shareholders are pushing for change. Over the past decade they have enjoyed a 164% total return including dividends, against 90% for Britain’s FTSE 100 Index. And at 5.2 times estimated 2023 EBITDA they value the enterprise at only a slight discount to BHP (BHP.AX), which enjoys fatter margins.
Their support will be key: summary dismissals, external monitoring and race- and gender-based promotion can be disruptive. But a dysfunctional workplace is an inefficient one, and in mining a dangerous one if bullying leads to safety lapses. Besides human tragedy, that means shaft or pit closures and production interruptions. For everybody’s sake, Rio’s toxic culture needs to change.
Follow @edwardcropley on Twitter
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
CONTEXT NEWS
- Rio Tinto suffers from a culture of bullying, harassment and racism, including 21 complaints of rape or attempted rape or sexual assault in the last five years, a damning external report showed on Feb. 1.
- Nearly half of the 10,000 or so employees who responded to a survey on workplace culture said they had been bullied. Racism was also found to be common.
- Chief Executive Jakob Stausholm described the findings as “disturbing” and said the mining giant would implement all 26 recommendations from former Australian Discrimination Commissioner Elizabeth Broderick.
- Rio’s London-listed shares closed up 3% on Feb. 1.
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