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Glencore/ Rio Tinto

Rio Tinto is an international mining company, dual-listed in the UK and Australia, with operations in 35 countries. Its mining interests include aluminium, copper, diamonds, gold, industrial minerals, iron ore, coal and uranium. Glencore is an Anglo-Swiss multinational natural resources company, operating in the areas of metals and minerals, energy and agriculture. It sells its products and services globally, with operations in over 50 countries.

Engagement Objective - Governance
Board Composition

Background

Various studies have revealed the value of a diverse workforce1, including board gender diversity2. The launch of the UN Sustainable Development Goals further strengthened the case for gender diversity, with two specific goals – one focusing on gender equality and the other on reducing inequalities. Meanwhile, the UK government-commissioned Davies Review and its successor, the Hampton-Alexander Review, called for women to make up at least 25% of UK FTSE 100 company boards by 2015 and 33% of FTSE 350 boards by 2020, as well as 33% of FTSE 100 executive teams and their direct reports by 2020.

Our engagement

Changes made to the Rio Tinto board in early 2017 included the appointment of three male non-executive directors. This resulted in only two female directors out of 12 sitting on the company’s board, falling significantly short of the 25% target of the Davies review. Although the company expressed its commitment to diversity, we believed Rio Tinto needed to demonstrate a more credible plan in order to reach the 33% target by 2020. We raised these concerns with the company ahead of its AGM, including in a call with its chair, making clear that we would oppose his re-election.

Gender diversity has also been an ongoing concern at Glencore, which was the last FTSE 100 company to include a female director on its board; it appointed its first female director in 2014. By 2017, no further progress had been made, with still only one female director out of eight and, in our view, no clear plan by which to meet 33% female representation on its board by 2020.

We raised our concerns about board diversity with the chair and the company secretary. The company acknowledged that diversity on its board was at an unacceptable level, explaining that its recruitment efforts had failed to secure female appointees. Shortly before its 2017 AGM, the company appointed another male director with asset management experience – potentially a missed opportunity to appoint a woman with experience in this field. We made clear that we expect to see progress ahead of the company’s next AGM and, in the meantime, opposed the election of the chair and the chair of the nominations committee.

Changes at the company

In February 2018, Rio Tinto announced the appointment of a new female non-executive director. Although her appointment took effect only after the company’s 2018 AGM, this was a step towards 33% female representation and we were pleased to be able to support the new chair.

In December 2017, Glencore appointed a second female non-executive director, bringing the company in line with the 25% target set for 2015. While we welcomed this development, we continue to engage with the company on its plan to reach 33% female representation by 2020.

  1. 1https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx
  2. 2https://www.msci.com/documents/10199/04b6f646-d638-4878-9c61-4eb91748a82b

Case studies are shown to demonstrate engagement, EOS does not make any investment recommendations and the information is not an offer to buy or sell securities.

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Head of Client Service and Business Development, Hermes EOS