Rio Introduces Claw-Back Option to Retrieve Executive Bonuses
Rio Tinto Group (RIO), the world’s second-biggest mining company, introduced an option to claw-back executive bonuses two months after revealing a $14 billion writedown that forced the chief executive officer to resign.
The introduction of the provisions gives the remunerations committee “the ability to reduce or cancel unvested long-term incentive plan awards and to recover vested long-term incentive plan awards in certain circumstances,” London-based Rio said today in its annual report. Awards under its performance share plan can be retrieved “in the event of gross misconduct.”
Former CEO Tom Albanese left the group in January, forgoing his bonus for a third straight year after failed deals in aluminum and coal. Companies in Britain and the U.S. have faced mounting pressure to curb executive remuneration amid an investor revolt dubbed “the shareholder spring.”
Rio Chairman Jan du Plessis said in July that companies need to be more responsive to views of shareholders on executive pay.
“It is absolutely clear that the spiral in executive remuneration that we have seen over the last two decades simply cannot continue,” Du Plessis said in a July 4 speech in London.
Albanese was replaced by Sam Walsh, the 63-year-old head of Rio’s iron-ore unit. Walsh will earn a basic salary of A$1.9 million ($2 million) for 2013, a 15 percent increase on last year’s pay.
Rio also said today that it’s “strengthening the alignment of executives’ interests with those of shareholders.” It’s raising the executive shareholding guidelines from two to four times base salary for the CEO and from two to three times for the other executives.
To contact the reporter on this story: Jesse Riseborough in London at firstname.lastname@example.org
To contact the editor responsible for this story: John Viljoen at email@example.com