Rio Tinto’s Reputational Blunder

Unfortunately I have been late in catching up on the story behind the departure of the CEO of Rio Tinto, the mega-mining company. The series of events should be a case study in all business schools and should be the subject of Fortune 500 board discussions because of its big miss on understanding corporate values, cultural respect for others and setting standards for corporate behavior that go beyond the law and beyond what is the norm.

In short, the company’s destruction of a 46,000-year-old sacred Aboriginal site in Australia last May in order to mine iron ore led to the resignation of the CEO and other top executives. The destruction was not illegal under Australian law and the company issued an apology saying it would help strengthen legal protections for Aboriginal heritage sites going forward. Today, companies must always be looking towards their moral core at all times, factoring in environmental, social and good governance (ESG). I’d add health and safety to that list of what matters in protecting reputation. Apparently from my readings, there was a lot of misunderstandings and missed signals as this travesty unfolded. Yes, the authorities had approved but this is a lesson in making sure you ask the right questions of the right people at the right time, hesitating when you are in doubt, legal-wise or not.

Clearly, the top brass must have known that something was not right since the BBC reported, "last week it was revealed that in the days running up to the caves' destruction in May, Rio Tinto hired lawyers in case opponents tried to seek injunctions to stop them." Moreover, Rio Tinto made the mistake of trying to make amends by saying it would cut the bonuses of certain implicated officers, as if that could make up for the destruction of “a 28,000-year-old animal bone tool and a 4,000-year-old belt made of plaited human hair.” As we often see, one misstep leads to another and another. Incremental errors (mostly small) pile up and shred reputations.

An excellent review of the situation with what is needed next comes from PRovoke and its author and founder Paul Holmes. He quotes Craig Badings, Sydney partner of trans-Tasman corporate affairs specialist SenateSHJ, as saying: “Issues management is lagging the evolution of shareholder activism. In the case of Rio, and countless other corporate crises, company risk lies, often, at the door of company culture. The old expression 'culture is set by what you are prepared to walk past'—or in Rio's case 'blast past'—was never truer.” Why does everything come back to culture — not getting the message to the CEO, too many yes men, too few flag raisers, too profit-focused, too little discussion with external stakeholders, too hard to turn back, too willing to pay a price to the problem go away, too late apologies, etc.

This scandal and destruction reminds me of President Trump’s original plan to hold a campaign rally in Tulsa, Oklahoma on the one day — June 19th — that honors the end of slavery in the US and which is widely celebrated by Black Americans. Companies, governments and other institutions must be hyper sensitive to dates and historical sites or moments of cultural significance to avoid the reputation landmines set for them. So many crises could be averted if someone just raised their hand or raised a red flag. I know I know. Easier said than done.