Corporate Governance: Responsibilities, Problems, and Recommendations at Rio Tinto

This article discusses the responsibilities of Rio Tinto's board for activities undertaken in Jukaan Gorge, problems from governance perspective that causes corporate malpractice, and recommendations for Rio Tinto board to prevent similar corporate scandals. It also provides references for further reading.

CORPORATE GOVERNANCE

TABLE OF CONTENTS
MAIN BODY...................................................................................................................................1
1. Responsibilities of Rio Tinto's board for activities undertaken in Jukaan Gorge....................1
2. Problems from governance perspective at Rio Tinto that causes corporate malpractice........2
3. Recommendations for Rio Tinto board to prevent similar corporate scandals........................2
REFERENCES................................................................................................................................4

MAIN BODY
1. Responsibilities of Rio Tinto's board for activities undertaken in Jukaan Gorge
The activities that were undertaken at the Jukaan Gorge by the board and the
management of the company were corporate blunders which can threaten consequences of both
the human and the environmental aspects of the society. The heritage and the sacred rock shelters
were destroyed of the traditional owners for the fulfilment of the business motives of expansion
and thereby seeking the profitability through it (Loop, Bromilow & Malone, 2018). Since this act
is socially unacceptable and this is the reason that the board of the company is apologetic for the
act and are taking several responsibilities for the activities that were performed at the Jukaan
Gorge:-
 The first and the foremost among the actions of the improvement are the reviewing of the
other large iron ore sites on which the company is currently working if any of them are
causing any of the disastrous or distressful consequences for the indigenous communities
(Alabdullah, Ahmed and Muneerali, 2019). It is to be known that for inducting this
activity the 54 million dry tonnes of the iron ore was removed from the reserves (Annual
report 2020, 2021).
 The other measure was through increasing the number of the indigenous managers in the
business who can know the concerns for such indigenous communities and can
accordingly plan so that such corporate scandals can be avoided by the Rio Tinto group
(Ioannou & Serafeim, 2011).
 The other most significant responsibility is that the board has to apply certain internal
control and the risk management practices, it can also assume the internal development
initiatives so that the training can be inducted regarding the community and the heritage
issues.
 Further the Content Security Policy of the company shall have to be expanded to detect
and mitigate any type of the risks that arise for the company. This is developed as the
area of expertise.
 The other important responsibility is regarding the integration of the heritage
management processes into the department of the mining operations of the business and
removing the gap (Adnan, Hay and van Staden, 2018). This can also be undertaken by the
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partnerships and the engagements and the strong internal communication that is
facilitated by the management of the company.
If all the roles and the responsibilities are fulfilled by the board of director's and the corporate
governance and the corporate social responsibility report are effectively framed then such
corporate failures can be avoided by the company.
2. Problems from governance perspective at Rio Tinto that causes corporate malpractice
The corporate malpractice that took place at the Jukaan Gorge of destroying the heritage
rock shelters of the traditional owners was due to the corporate governance issues and problems
regarding the perspectives of the board of director's of the business. The major problems that
were arising in the business are:-
 One of the most significant problems were that the Rio Tinto's systems and the internal
decision-making failed to prevent the occurrence of the incident (Solomon, 2021). Apart
from that the other factor is that the corporate governance perspectives of the company,
board of directors and the employees was also problematic and that is the reason that
nobody inspected the heritage and cultural point of view of the company.
 The high level of the distress and the public outcry was with the reason because the
responses that were provided after the occurrence of the event were very ad hoc and
erratic. Instead of accepting the mistake and apologizing for the same the management
tried to resolve it by giving the unreasonable excuses for the same (Kovermann and
Velte, 2019).
 The failure of the weak internal flow of communication was one of the reasons that were
identified for the lack of corporate governance that was followed by the company. This
restricted the flow of the useful information to the various departments in the company.
 The engagement policy of the company, flaws in the system and the data sharing
practices are the reasons for the series of decisions, actions and the omissions that are
caused during the act (Pearson, 2020).
3. Recommendations for Rio Tinto board to prevent similar corporate scandals
There are several recommendations that can be applied by the Rio Tinto group such that
the corporate scandals can be prevented and avoided by the business and is able to regain the
trustworthiness of the shareholders and the investors of the business. Also, through this the
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intervention of the government and the indigenous communities can also be abandoned in the
business. Some major recommendations are:-
 One of the suggestions is that the operations and the mining department of the enterprise
shall be trained regarding giving the equivalent priority to the heritage and the cultural
issues as is in the case of operational performance that is given by them (Shrives &
Brennan, 2015). It shall also be involving the escalation of such issues in the notice of the
senior management of the business so that could be reflected in the decision-making
process of the company.
 The other major recommendation can be in the form of the reporting requirements to the
executives through the strengthening the oversight of the various communities and the
heritage issues (Rio Tinto publishes board review of cultural heritage management,
2021).
 The regularisation in creation of the policies, standards and the code of conduct such that
the governance in the form of health, safety and the environmental protection can be
ensured.
 The other improvement that can be processed by the management of the company is that
they can build the better capacity of the internal audits in the company so that it can be
assured and the guarantee can be provided regarding the company following the
independent international heritage standards and the guidelines that are issued (Wensing,
2020).
 The other aspect of the same can be that the company employees as well as the top
management are highly accountable for all the activities and the deeds that are performed
and certainly in case of several mishaps in case of heritage and the cultural issues that are
associated with the indigenous communities (Bhagat and Bolton, 2019).
 Lastly the better relations, partnerships and the engagement can be established with these
communities.
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REFERENCES
Books and Journals
Shrives, P J & Brennan, N M 2015, ‘A typology for exploring the quality of explanations for
non-compliance with UK corporate governance regulations’, The British Accounting
Review. vol. 47. no. 1, pp. 85–99. https://doi.org/10.1016/j.bar.2014.08.002
Solomon, J 2021, Corporate governance and accountability, 5th edn, John Wiley & Sons, US
Ioannou, I & Serafeim, G 2011, The consequences of mandatory corporate sustainability
reporting, Harvard Business School, viewed 4 Jan 2019: https://hbswk.hbs.edu/item/the-
consequences-of-mandatory-corporate-sustainability-reporting
Loop, P, Bromilow, C & Malone, L 2018, The changing face of shareholder activism, Harvard
Law School Forum on Corporate Governance and Financial Regulation, viewed 15 April
2021, https://corpgov.law.harvard.edu/2018/02/01/the-changing-face-of-shareholder-
activism/
Wensing, E., 2020. The destruction of Juukan Gorge: lessons for planners and local
governments. Australian Planner. 56(4). pp.241-248.
Pearson, E., 2020. Heartbreak in the Juukan Gorge:'Embarrassingly out of Kilter'Law Destroys
46,000-Year-Old Aboriginal Sacred Sites. Art Antiquity & Law. 25(2). pp.147-159.
Bhagat, S. and Bolton, B., 2019. Corporate governance and firm performance: The
sequel. Journal of Corporate Finance. 58. pp.142-168.
Kovermann, J. and Velte, P., 2019. The impact of corporate governance on corporate tax
avoidance—A literature review. Journal of International Accounting, Auditing and
Taxation. 36. p.100270.
Adnan, S. M., Hay, D. and van Staden, C. J., 2018. The influence of culture and corporate
governance on corporate social responsibility disclosure: A cross country analysis. Journal
of Cleaner Production. 198. pp.820-832.
Alabdullah, T. T. Y., Ahmed, E. R. and Muneerali, M., 2019. Effect of board size and duality on
corporate social responsibility: what has improved in corporate governance in
Asia?. Journal of Accounting Science. 3(2). pp.121-135.
Online
Rio Tinto publishes board review of cultural heritage management. 2021. [Online] Available
through: <https://www.riotinto.com/en/news/releases/2020/Rio-Tinto-publishes-board-
review-of-cultural-heritage-management>
Annual report 2020. 2021. [Online] Available through:
<https://www.riotinto.com/en/invest/reports/annual-report>
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