John Menadue

  • Rio Tinto – Corporate Governance and Asia

    Since 2007 Rio Tinto has written off $US 35 billion in failed investments. It must be a world record. There are probably more write-downs to come with its investments in Mozambique coal and in aluminium in North America.

    Tom Albanese has been sacrificed but the remainder of the Rio Tinto board are apparently unscathed. They have been too lax with shareholders money that they have washed so comprehensively down the drain. The boards of some of our mining companies in the mining boom must think that they are playing with monopoly money. Booming commodity prices and demand lulled them into being careless on major investment decisions. They became very gullible. Not only have they been lax in investment decisions but they have been careless in allowing costs to balloon.

    The board of Rio Tinto oversaw the company’s operations in China when the iron ore price quadrupled. But in the business euphoria, Rio Tinto took its eyes off the ball and left local staff in charge. Four of Rio’s staff in China admitted to bribery in a Chinese court. They are now languishing in Chinese jails for up to 14 years. This sorry performance was described by our former Ambassador in Beijing, Geoff Raby, as a ‘management failure’. He was being polite. It was a debacle. So far it is not clear that any senior executives or board members have been held accountable.

    Sam Walsh was on the board of Rio at the time he headed Rio’s iron ore division, with its substantial trade with China. He is now the CEO of the whole organisation replacing TomAlbanese.

    It is also suggested that the problems in Mozambique related in part to Rio’s management style, including its relations with the Mozambique government. Rio did not appoint Portuguese speaking executives in Mozambique to manage the business.

    Our large mining companies have an excellent record as geologists, explorers and people skilled at digging up and transporting minerals but they are yet to demonstrate business skills particularly in countries that are culturally and linguistically different. I do not know of any major Australian mining company that has a board member or CEO who can fluently speak at least one of the languages of our major customers – China, Japan and Korea. Few would have even a cultural understanding of how business is conducted in these countries.

    These large companies pontificate about sovereign risk when the Australian government attempts to introduce reasonable tax regimes. These companies also tell us that we should all be raising our productivity with upskilling and improved work practices. But they don’t practice wheat they preach.

    The disasters which Rio Tinto has brought upon itself were predictable.

    John Menadue

  • Australian media and President Park Geun-Hye of ROK

    If we want to be serious about our future in the ‘Asian Century’ we will need to start with our media. The election of President Park Geun-Hye in ROK in December last year was a very significant event, but it passed in the Australian media with only the briefest of mentions. (The same could be said of the election of Prime Minister Abe in Japan in the same month.)

    Contrast that with the overwhelming coverage we had last year of the US Republican primary, the US Presidential election and now the inauguration of President Obama. The media coverage of the Chinese National People’s Congress last year also paled into insignificance compared with the morning sickness problems of a British royal. Looking at our media, an outside observer would conclude that Australia is a large island moored off London and New York.

    The new ROK President and her country are important for many reasons. The ROK is a great success story. It is a world leader in the digital economy. It is our fourth largest trading partner and our third largest export market in areas as diverse as minerals, energy, travel and education services. With ROK we have vital shared interests in resolving the tensions on the Korean peninsula. When the North Korean regime collapses there will be large numbers of refugees. We will be called on to cooperate particularly with the ROK. Like us, the ROK sent peacekeepers to Afghanistan, Iraq and Timor. Australian servicemen fought and died in Korea in the 1950s. We are fellow members of the G20.

    Against that background the election of President Park Geun-Hye was very newsworthy. Personally, she has a very interesting and colourful background.

    The election of a woman as President in a traditional patriarchal and Confusion society is a major breakthrough.  As the daughter of former strongman, Park Chung-Hee, she symbolises the ROK’s translation from a ruthless dictatorship to a maturing democracy. As the ‘daughter of a dictator’ she experienced the assassination of her father by his intelligence chief. Her mother was killed by a North Korean assassin.

    But all that significant and colourful history and more raised little interest in the Australian media. It was much easier to recycle UK and US material. Our media exert a stultifying cultural and information grip which is more about our past that our future – in Asia.

    John Menadue