Ethics And Governance EXECUTIVE SUMMARY

ETHICS AND GOVERNANCE EXECUTIVE SUMMARY1 INTRODUCTION1 Summary of the Company 1 Summary of Corporate Governance3 Board Orientation5 Interpretation of Company Communications 6 CONCLUSION 8 REFERENCES 9 EXECUTIVE SUMMARY Ethics and Governance are important parts of functioning of an organisation and it is importanttoeffectivelyensureeffective application of both these factors within working of a company. The report required effective insight in the company and its corporate governance, for which, secondary research through annual and sustainability reports of the firm

ETHICS AND
GOVERNANCE

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................1
REPORT..........................................................................................................................................1
Summary of the Company......................................................................................................1
Summary of Corporate Governance.......................................................................................3
Board Orientation...................................................................................................................5
Interpretation of Company Communications.........................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

EXECUTIVE SUMMARY
Ethics and Governance are important parts of functioning of an organisation and it is
important to effectively ensure effective application of both these factors within working of a
company. For this purpose, the following report is using Rio Tinto, Ltd.
The report required effective insight in the company and its corporate governance, for
which, secondary research through annual and sustainability reports of the firm were utilised to
gain information regarding the same. It was determined, that the firm has sound corporate
governance structure which is important for its long term sustainability.
Another purpose of the report was to determine orientation of board of Rio Tinto, Ltd.,
and company communication. For this agenda, Legitimacy Theory was applied which allowed to
analyse reporting of the firm in context with the principles of this theory. It was identified that its
social and environmental reporting is very effective and it must apply the same reporting in
future as well.
INTRODUCTION
Ethics refer to the principles, belief systems and moral values which governs behaviour
of individuals and organisations while performing an activity (Raman, 2016). On the other hand,
governance means effective establishment of several essential policies, as well as procedure for
continuous monitoring of implementation of the same. The report below is based on ethics and
governance within Rio Tinto Ltd., which is one of the largest mining and metals corporation,
headquartered in Melbourne, Australia. It covers a brief summary of the company, corporate
governance within the firm, orientation of board and Interpretation of communication within the
company using Legitimacy Theory.
REPORT
Summary of the Company
Rio Tinto Ltd. is a multinational corporation which operates globally and is one of the
market leaders in mining as well as in steel. The organisation operates in metals and mining
industry and has an effective worldwide presence (Sudhakar, 2018). Furthermore, the company
has effective strategies to ensure a consistent position within the market. In addition to this, the
company has appropriately followed innovation, diversification and expansion as viable and
constant strategies to effectively succeed in the marketplace. In addition to this, the company
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performs effective and necessary marketing research which helps the firm in effectively staying
ahead.
Products:
There are several products in which the firm effectively deals in such as Iron ore,
aluminium, coal, diamond, gold, etc. furthermore, all these commodities are produced using
extensive and latest technological methods and equipments, which assists the Rio Tinto in
effectively enhancing competence within its production as well as of the whole organisation
(Doh, Husted and Yang, 2016).
History:
The firm has a history of more than 140 years as the firm came into operations in 1873.
Its history began with a consortium of multinational investors buying a mine complex on Rio
Tinto from Spanish Government. The syndicate which brought the complex was headed by a
well known Scottish entrepreneur, Hugh Matheson, which led to establishment of “Rio Tinto
Company”. After the acquisition however, new processing facilities were constructed by the
organisation and further new technologies and techniques were introduced. Such operations led
the company of being one of the biggest copper producer for a brief period of time, which was
from 1877 to 1891.
Major Operations:
There are several operations which made the company quite reputed within the
marketplace. One such operation was held in 1905 where the firm along with engineer Herbert
Hoover created a new and effective process to extract zinc through residues. Such waste was left
post-extraction of lead as well as silver from ores.
The firm also had numerous acquisitions and mergers which enabled the company to
work in an effective and essential manner. Within 1995, the firm merged its Australian and UK
businesses, which led to merge all its operations under a common name which was 'Rio Tinto'.
This organisation has also been quite consistent on ethical practices as well as risk
management. For instance, within 2015, the organisation implemented an effective Critical Risk
Management programme which was related to fatality prevention within jobs which were
subjected to fatality risk. This program was quite effective as by end of 2016, it led to almost 1.3
million verifications within more than 60 sites that were operational (Rio Tinto: History, 2019).
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The firm is currently working on several multinational projects with a view to enhance its
business operations and effectively earn high profit while performing ethically and responsibly
towards achieving effective safety standards, along with appropriate and essential practices
(Espindola and Guerra, 2018).
Summary of Corporate Governance
Corporate Governance refers to a framework which includes several practices as well as
frameworks as regulated by the board of directors through which the ensure fairness,
transparency as well as accountability within the workplace. It is crucial for a company to follow
such guidelines and ensure effective practice within the organisation which allows the firm to
function appropriately within the market and effectively ensure trust and confidence of each and
every stakeholder of the organisation. Following is the corporate governance structure which is
effectively followed by the organisation.
Composition of Board:
According to the 2018 Annual Report of the organisation, The committee along with the
board tend to maintain an effective balance between the executive as well as non-executive
directors of the company. Furthermore, the composition of board is undertaken effectively on the
basis of skills, capacity, diversity and experience. Majority of the directors within the company
are independent (Rio Tinto: 2018 Annual Report, 2019). In addition to this, they are responsible
for effectively improving the credibility of the company, along with setting up relevant and
appropriate governance standards which are very crucial for Rio Tinto to follow. The chairman
of the organisation, Simon Thompson is also an independent director. He has the essential
worldwide experience in metal and mining industry. Furthermore, he has worked in several
organisation which allowed him to gain appropriate and adequate experience which is both
required as well as sufficient for the current job role within the company (Tandon, 2015).
Chairperson and CEO Reports:
Within an organisation, it is quite crucial to obtain CEO and Chairperson Reports which
allows to gain an insight of their point of view towards the corporate governance structure of the
company. It would allow all the stakeholders to effectively be informed about the processes and
operations which are being followed by the firm, along with its future plans and targets.
As for the Chief Executive's report is concerned, the emphasis of his reporting was
related to performance of the company, during 2018. According to his report, the firm had almost
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$13.5 Billion cash returns to stakeholders, which is highest ever experienced by the company. As
for corporate governance through his report, the firm has effectively focused on building
leadership and technical capabilities within the people of the organisation along with
establishment of a culture which appropriately nurtures innovative ideas as well as effective
performance.
However, chairman's report focused exponentially on the sustainability and social as well
as economic contribution. As for the latter, his report informed that Rio Tinto has made a
contribution of almost $42.8 Billion in 2018. Apart from this fact, the firm appropriately, to
strengthen its ethical structure, organisation is consistent on practising transparency along with
disclosure of important shareholders. Their operations also include adherence to human rights.
As for sustainability, the firm has revised its sustainability strategy. Rio Tinto considers
climate change as the biggest threat for the organisation. To cope with this threat, the firm has
took essential steps such as Greenhouse Gas Abatement Curves which allowed the company to
effectively assess climate change resilience in their operating assets as well as the overall
infrastructure. This has allowed the company to combat with the climate changes issue and
enabled the Rio Tinto in effectively conducting its operations effectively, without damaging the
environment (Mahapatra and Panda, 2016).
Remuneration Report:
An important practice which ensures appropriate and effective retaining of employees as
well as board members is remuneration. This refers to the amount which is paid against the
services required by an individual. As for Rio Tinto, the remuneration policy is set in a manner
which is fair and links to performance levels of individuals within the company.
In perspective of Chief executive, the individual within the organisation is remunerated
on the basis of their overall performance. However, the executive of the firm is also subjected to
Short-Term and Long-Term incentive plan. The structure for remuneration in case of executives
effectively emphasises on relationship between group performance and various elements of
remuneration. The directors and executives are paid their base salary, along with several other
benefits such as healthcare. In addition, depending on their performance, the firm has laid down
STIP and LTIP alongside bonuses.
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Board Orientation
For any business organisation, it is quite crucial to determine the orientation of board
which is a panel set up to oversee the major operations of the company. Within Rio Tinto, all the
major decisions of the firm are taken by the board and it is responsible for providing an effective
direction to the organisation.
The board of Rio Tinto involves the Chairman, Chief Executive, Chief Financial Officer
and 7 Non-executive directors all of which are leading the firm towards achieving its effective
organisational objectives, along with establishing a culture which involves clarity, transparency
as well as ethical business practices (Rio Tinto: Board, 2019). The orientation of the board is
situated around developing highest quality and best mines which provides customers effective
products and are a benefit to local communities. Furthermore, another prominent purpose for the
orientation of this company is related to providing materials to customers which contribute in
ease in their day to day work. The board wants to function in a way in which their operations
lead to growth in economies and ensuring prosperity in community (Goyal, Routroy and Shah,
2018). As per the board, the purpose on which Rio Tinto is built on is that the firm, through its
products like Copper, Aluminium, Gold, Diamonds as well as several industrial minerals like
iron ore and uranium contribute in making up an effective world. Additionally, Corporate
Governance and Ethical working are also promoted by the company. The board of Rio Tinto is
keen on building up strong partnership with several industrial leaders through developing such
alloys which allow these companies in making appropriate products for next generations, such as
fuel-efficient and lighter vehicles. Moreover, as part of ethical practices within the organisation,
Board also effectively emphasises on forming appropriate ties with several NGOs worldwide,
with whom they work towards resolving mankind challenges.
However, there has been several changes within the board which are quite important to
be understood in relation to analyse its orientation. According to the 2018 Annual Report, there
were several changes within the board and the firm witnessed inclusion of several new members
within the same. For instance, Moya Greene and Simon McKean were two new non-executive
directors that were welcomed in the board. The agenda of selecting these individual was that they
are both experts with immense experience and effective mindset. Furthermore, the other
members believe for them to bring innovative and effective vision to the company.
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The board also ensures effective succession planning in case an existing member is
required to be replaced. To attain the same, the firm aim to bring diverse individuals who possess
complimentary range of skills, experience as well as knowledge to board. Furthermore, the
agenda of selecting new board members within Rio Tinto is that the firm wishes to ensure
authentication and effectiveness in its decision making. Moreover, they also aim at functioning
in an ethical work frame, providing appropriate services to the stakeholders as well as to
communities.
There are different visions of the board members which are unified as part of their
orientation to essentially accomplish the set goals and objectives of Rio Tinto. For achieving
effective purposes laid down by the firm and its corporate planning, board emphasises on four
effective strategies, which are portfolio, people, performance as well as partners. As for
portfolio, the firm effectively aims at operating with world—class assets and several multi-
decade sources which delivers effective returns within the cycle and allow the firm to attain their
growth opportunities. Another aspect related to the same is performance (Rio Tinto: Our
Purpose, 2019). To ensure adherence to its corporate governance and ethical framework, board
has emphasised upon safety as its prime goal to safeguard the health of its employees and people
associated with its projects. Moreover, latest technologies, along with innovation are also being
positioned effectively to address several environmental, geological, alongside cost pressure for
the organisation. Moreover, as for people, technical capabilities are being prime criteria for the
organisation to select its employees who would be effectively supporting the company in
achieving its objectives. Lastly, the board effectively focuses on remaining competitive, for
which, it is essential for the company to form external partnerships with stakeholders including
investors, suppliers, customers, etc.
Its orientation also focuses on evaluation of the performance of board which, again, is an
important procedure to be followed. To achieve this purpose, the firm indulges in an annual
review through external organisation through which, their performance becomes evident along
with recommendations for improvements (Akinsulore, 2016).
Interpretation of Company Communications
Communication refers to a procedure through which an organisation facilitates exchange
of vital information internally as well as external to the company. It is important for an
organisation to communicate its working and practices to external stakeholders in order to
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showcase its performance on ethical front. Furthermore, it is also necessary for organisation, as it
allows individuals and organisations external to the firm, get an effective idea of their working
and procedures.
Legitimacy Theory is one of the key theories and frameworks which circulates around the
principles of voluntary environmental and social disclosures in various corporate
communication. The agenda for which organisations use this phenomenon effectively is related
to gaining, maintaining as well as repairing their legitimacy through such reporting. One major
issues on which this theory revolves around is Corporate Social Responsibility. This refers to the
aspects which must be followed by each organisation to fulfil their social and environmental
responsibilities.
CSR Disclosure is quite a necessary element which must be involved in reporting of the
firm. With rising of social awareness, more organisations tend to effectively report their social
and environmental practices as a part of their annual reporting. In addition, it is also a crucial
part of corporate governance of firms. (Segura and et. al., 2017)
Due to dynamic social expectations, it is essential for companies like Rio Tinto to operate
in such a manner, which effectively fulfils such changing perceptions and expectations.
Moreover, alongside social expectations, companies must also be environmentally responsive.
Thus, their social reporting must also highlight changes which they have induced within their
organisation in response to such changing social and environmental conditions.
There are two prominent aspects of legitimacy theory, which are “legitimacy gap” and
“legitimacy strategies”. While the former refers to difference between social expectations and
actual operating of organisation, the latter means the actions which are taken by organisations
with respect to reduce as well as limit the gaps related to its legitimacy.
In context with social and environmental reporting of Rio Tinto Ltd., it is quite effective
in reporting its social as well as environmental actions and strategies taken by the organisation in
response to rising demands. For instance, 2017 Sustainability Report effectively portrayed its
community relationships and how well the firm is engaging in performing activities to ensure
social benefits (Rio Tinto: 2017 Sustainability Report, 2019). As an example, its reporting
emphasised on how the firm is protecting human rights along with cultural heritage through its
effective actions. The firm, to ensure regional economic development, has developed several
community engagement plans which would assist the company in working with several
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organisations to work towards communal development. As far as legitimacy theory is concerned,
communities demand an effective performance of the company in terms of contributing to
different communities in areas in which the firm operates in. In its social reporting, the firm has
effectively showcased their strategies which led to fulfilling of the expectations of these
communities. For instance, the firm spent almost US$176 Million on several community
contribution programs (Subramaniam, Kansal and Babu, 2017).
Moreover, as for several environmentalists, there is an effective expectation from the
company that the firm appropriately performs in ways which preserves the environment and lead
to its effective protection. To ensure the same, its social reporting effectively emphasised on
reduced greenhouse gas emissions by 27%, use of renewable energy for electricity, etc.
Thus, the firm and its reporting is not at all subjected to any sort of legitimacy gap, which
makes it quite effective in relation to legitimacy theory and its principles of social and
environmental disclosures (Goel, 2019).
CONCLUSION
Thus, it is concluded, that ethics and governance are quite effective practices within the
country. It is essential to analyse the firm and its operations which allows to gain an insight on
their functioning and determines areas of applied ethics and governance. Moreover, corporate
governance structure also enables identification of several principles on which the firm operates
in. Furthermore, board orientation is essential to understand appropriate insight into the
formation and functioning of board of an organisation. Lastly, legitimacy theory is very
important to be applied by companies to ensure effectiveness in their social reporting.
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REFERENCES
Books and Journals
Akinsulore, A., (2016). The effects of legislation on corporate social responsibility in the
minerals and mines sector of Nigeria. Journal of Sustainable Development Law and
Policy (The), 7(1), pp.97-115.
Doh, J., Husted, B.W. & Yang, X. (2016). Guest editors’ introduction: Ethics, corporate social
responsibility, & developing country multinationals. Business Ethics Quarterly, 26(3),
pp.301-315.
Espindola, H.S. & Guerra, C.B., (2018). The ongoing danger of large-scale mining on the Rio
Doce: an account of Brazil’s largest biocultural disaster. In From Biocultural
Homogenization to Biocultural Conservation (pp. 97-108). Springer, Cham.
Goel, S., (2019). Ethical Accounting: The Driver in Recovering Markets. In Eurasian Business
Perspectives (pp. 95-106). Springer, Cham.
Goyal, S., Routroy, S. & Shah, H. (2018). Measuring the environmental sustainability of supply
chain for Indian steel industry: a graph theoretic approach. Business Process
Management Journal. 24(2). pp.517-536.
Mahapatra, M., & Panda, S. (2016). Ethical Business for Sustainable Development: A New
Paradigm of Corporate Social Power in Global Governance. Journal of Institute of
Public Enterprise, 39.
Raman, S., (2016). CSR Enabling Employees' Retention-The 2-20-200 concept. Sankalpa, 6(1),
p.1.
Segura, L. & et. al., (2017). Corporate Governance in Brazilian Companies: The Influence of the
Founder in the Financial Decisions. In Dimensional Corporate Governance (pp. 121-
137). Springer, Cham..
Subramaniam, N., Kansal, M. & Babu, S. (2017). Governance of m&ated corporate social
responsibility: Evidence from Indian government-owned firms. Journal of Business
Ethics. 143(3). pp.543-563.'
Sudhakar, G.P., (2018). Tata: the biggest boardroom coup. Emerald Emerging Markets Case
Studies. 8(3). pp.1-24.
Tandon, R., (2015). Mining resources: driving social justice?. Journal of Corporate Citizenship,
(58), pp.45-47.
Online
Rio Tinto: 2017 Sustainability Report. 2019. [Online] Available Through:
<http://www.riotinto.com/documents/RT_SD2017.pdf>
Rio Tinto: 2018 Annual Report. 2019. [Online] Available Through:
<http://www.riotinto.com/documents/RT_2018_annual_report.pdf>
Rio Tinto: Board. 2019. [Online] Available Through:
<https://www.riotinto.com/aboutus/management-board-3502.aspx>
Rio Tinto: History. 2019. [Online] Available Through:
<https://www.riotinto.com/aboutus/history-4705.aspx#faq-0>
Rio Tinto: Our Purpose. 2019. [Online] Available Through:
<https://www.riotinto.com/aboutus/about-rio-tinto-5004.aspx>
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