Rio shareholders played the long game and ultimately got their prize scalp

Given the Rio annual meeting is held in April, shareholders had six months to plot phase two of the battle – to force accountability at board level. Its outcome was arguably less certain.

The major Australian shareholders leading the charge had to deal with the inevitable loss of momentum due to the passage. So their ammunition had become somewhat depleted.

In the early days following Rio’s unprecedented Juukan cave disaster, the shareholders spearheading the move for accountability had other numerous international shareholders falling in behind them.

After the departure of Rio’s chief executive Jacques and his senior management, the intense heat around the issue was dissipating.

But Rio’s chairman, UK-based Simon Thompson, clearly understood he was still on the hook for the cave blast. He knew there was a decent sized group of investors prepared to vote against his re-election at this year’s annual meeting to be held over the next six weeks. The planned protest vote would probably have been insufficient to dethrone the chairman but it would have been highly embarrassing and more than enough to raise eyebrows among the London club set.

Of course several of the large industry funds had also been pushing for Rio to appoint an Australian chief executive. They lost that battle when Rio elevated its Danish born chief financial officer Jakob Stausholm to fill the role after Rio argued successfully that he was the best-qualified person to take the job.

But having an Australian chief executive was not an issue over which shareholders were prepared to die in a ditch. And since his appointment, Stausholm has been making all the right noises about righting past wrongs, being sensitive to cultural issues and meeting with various stakeholders including traditional owners and shareholders.

But the issue of board accountability was more important and while lobbying efforts were removed from the public eye, the private meetings with shareholders and the board were taking place behind closed doors.

Thompson was cornered.

To Thompson’s credit he said the decision to leave, which was announced on Wednesday, was due to the failures over Juukan Gorge. It was a smart move because it allows some of the responsibility for the tragedy to leave with him.

It was also wise for Rio to announce the departure of fellow director Michael L’Estrange – whose position on the board was seriously compromised by his authorship of an internal investigation that did not ping accountable individuals. (Although Rio said L’Estrange left for health reasons.)

Now it is time for Australian shareholders to get on with phase three which involves moving the governance focus out of London and back to Australia.

When investors and the broader community were looking for answers, L’Estrange’s report on cultural heritage management was described variously as a whitewash, riddled with problems and “unbelievable”. While the report offered a series of recommendations on how to deal with traditional owners, it skirted around accountability.

As such it incensed rather than placated Rio’s critics.

With the impending departure of L’Estrange, there will be only two Australian directors left on the board, Megan Clark and senior independent Simon McKeon.

McKeon is now one of two senior independent directors charged with looking for Thompson’s replacement -which could mean he is not in contention for the chair. But this might also just reflect board protocol.

However, there is an argument to suggest that the chair should be drawn from outside the company given the current board members all have Juukan dirt under their fingernails.

Rio will need to replace L’Estrange with an Australian director and will be looking for a North American to replace Canadian David Constable who stepped off the board last December.

There is also a possibility that Rio will look at a candidate with an Indigenous background to replace L’Estrange. That would be a particularly wise decision.

Now it is time for Australian shareholders to get on with phase three which involves moving the governance focus out of London and back to Australia.