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Unions launch global attack on Rio board

By Stephen Long, Financial Review,
Wednesday 8 March 2000

Unions have forged a global alliance to try to oust the board of mining giant Rio Tinto through an unprecedented strategy of shareholder activism.

The international campaign involving the ACTU, Britain's Trade Union Congress and the United States' peak union council, the AFL-CIO, will try to force changes to Rio's board of directors at annual general meetings in May.

They will seek to marshall investor support for the move by arguing that Rio has breached principles of good corporate governance because its board is controlled by the company's management.

Ms Susan Ryan, an executive of the Australian Institute of Superannuation Trustees, has joined forces with the global union campaign and will lobby institutional investors to support union-backed resolutions to be moved at the company meetings.

The unions believe they can win support from major pension funds around the world which hold Rio shares.

Senior union officials consider they have a good chance of forcing changes to the board of the global mining company.

They say their resolution on the make-up of Rio's board is in line with standard principles on corporate governance followed by American institutional investors, and is likely to attract their support.

Under these principles company boards should include a majority of directors independent of company management.

If it succeeds at the London and Melbourne annual general meetings of the dual-listed company, the union motion would stop Rio from going ahead with its plan to appoint current chief executive, Mr Leon Davis, as a non-executive deputy chairman after he retires next month.

The shareholder action is the first joint international campaign by employee shareholders against a multinational company and the first by Australian unions.

The strategy is part of a new union emphasis on "corporate campaigning" techniques pioneered in the United States and embraced by the ACTU under its new secretary, Mr Greg Combet.

Mr Combet and the national secretary of the Construction Forestry Mining and Energy, Mr John Maitland, will launch the campaign this morning in Sydney.

The campaign is the latest phase in a long-running series of industrial disputes between unions and Rio Tinto. The mining giant has earned the ire of the labour movement by ousting unions from pay negotiations and shifting workers onto individual contracts.

Senior union officials believe gaining greater independent representation on Rio's board may help change what they believe is management's hostile attitude towards unions and collective bargaining.

Union shareholders will submit two resolutions at the annual meetings. The first demands that Rio become more accountable by appointing an independent, non-executive deputy chairman. The second calls on the company to adopt a "credible workplace code of practice" that commits Rio to upholding International Labour Organisation conventions.

Unions will argue that good corporate governance demands that Rio Tinto:Appoint an independent, non-executive deputy chairman to counterbalance the powerful executive presence on the board.Ensure it has a majority of non-executive directors on its board.Specify that non-executive directors must have not been employed by Rio Tinto or an affiliate in any executive capacity for at least three years.

Rio Tinto recently announced that Mr Davis would retire in April but remain on the board and become its deputy chairman at the forthcoming annual meeting.

The union motion is designed to block his appointment.

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