The idea of a board of directors is one of collective responsibility for major decisions, but it is those unfortunate to be at the head of a company at the wrong time who carry the can.
LONDON (MINEWEB) – Among the spate of CEO changes we have already noted, many observers had remarked that Rio Tinto’s CEO, Tom Albanese had effectively been fired as a consequence of the huge write-down of the company’s investment in major aluminium producer Alcan, coupled with the smaller write down of its Mozambique coal assets acquired from the takeover of Riversdale coal last year.
The Riversdale acquisition was obviously down to an extent to Albanese, but a company CEO has to rely on his management executives and board for pursuing, and approval of, major decisions of this type.
It’s not just a case of the CEO pushing through an investment of the type without receiving plenty of advice first. In this case the acquisition appears to have been pushed through on the advice of a technical team led by Doug Ritchie who lost his job at the same time as Albanese.
Now, under normal circumstances, Albanese might have survived the Riversdale debacle on its own but one suspects that the Rio Board, faced with deciding to take the Alcan and Riversdale write downs at the same time, also decided that a high profile head would have to roll – and Albanese became the obvious scapegoat even if the board itself was perhaps more responsible for the Alcan takeover than Albanese himself given the timing of his appointment as CEO a mere two months before the Alcan deal was finalised.
There was probably little Albanese could have done to prevent it in this early stage of his tenure as CEO, even if he personally had doubts about the wisdom of the takeover.
Alcan was a peculiar case anyway. It was facing a takeover by its then bigger rival, and former parent, Alcoa, and was actively seeking a ‘white knight’ to take it out of Alcoa’s clutches.
Meanwhile, BHP was in the throes of preparing a hostile bid for Rio Tinto and, reports suggest, Rio felt the acquisition of Alcan would make it more difficult to digest. So it was both a white knight and poison pill situation. At the time commodity markets were riding high. It appeared to be a win-win situation for Rio. Not surprisingly the company’s brand new CEO would have been easily coerced by the board into continuing with the Alcan takeover.
It all fell apart a year later with the collapse of commodity markets almost bringing Rio Tinto to its knees, and Albanese should perhaps have been given credit for subsequently bringing it back to its feet rather than being dismissed seemingly ignominously without the customary payout. Such is life.
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