The turmoil within the top ranks of Rio Tinto has spillled out onto the front pages of the newspapers today. Shareholders are angered at management’s refusal to discuss the Chinalco deal and feel top-drawer assets are being sold at bottom-of-market prices. There’s lingering anger over the purchase price and terms for Alcan. And the deal with China’s state-run company wouldn’t be necessary if Rio Tinto hadn’t been so forceful rejecting all overtures from BHP Billiton.
Today’s The Australian reports that institutional shareholders do not support the Chinalco offer and may be seeking to oust CEO Albanese and Chairman Skinner. Said one:
“Shareholders have been more vocal against this deal than I’ve seen in a long time - it’s unusual to see people that active.”
Adding to their ire, shareholders have been unable to meet with CEO Tom Albanese. He’s also been forced to delay business trips as he seeks to deal with growing shareholder discontent.
Shareholder activism is a rarity in Australia. Individuals and institutions tend to accept the leadership of companies and rarely disagree. The majority of annual meeting proposals are accepted with a vast majority. Occasionally a block of disaffected shares will be voted against management but rarely do they override the company’s plans.
In Rio Tinto’s case the vast majority of shareholders are based in the UK - some 78% of the stock is held in Britain. So the upsets and outpourings reported down here are all the more unusual. We’re witnessing a glimpse of how other markets deal with belligerent management.
On-line journal “Crikey” founder Stephen Mayne is a one-person gadfly (individual shareholder activist). He has a diverse portfolio owning one share of most Australian companies. Like Charlie’s golden ticket to enter Willie Wonka’s factory, Mayne’s sole shareholding entitles him to enter annual meetings and query top management. He rides that single share for all it’s worth.
“The Mayne Report” chronicles one man’s journey to keep companies accountable to retail shareholders. It’s a valiant battle and one that may be like attacking paper tigers. The slashing and jousting may lead to nothing more than paper cuts.
But for all Stephen’s efforts the concept of shareholder activism is best raised when unrest at a company like Rio Tinto spills out into public. We’ll continue to watch this company and it’s battles as it sets the stage for change brought about by concerted shareholder action. Australia’s shareholders may be sleeping dragons but Rio Tinto CEO Tom Albanese looks to be the unlucky knight who woke this beast.
