The following is a blog written by Andy Whitmore after the 2014 Rio Tinto AGM

A funny thing happened on the way to boredom. I was sitting, as so often, in a company shareholder annual general meeting; this particular edition being Rio Tinto’s 2014 AGM. We were in the first section of the AGM, which is where the company gets to boast (via a pre-made video, its chair and its CEO) what a wonderful company it is before opening up to questions from shareholders (who often try to argue the opposite).

Having sat through so many of these festivals of self-congratulation, which almost seem designed to set a soporific tone before the entertainment begins, I tend to switch off. This is especially the case if you have read the key points in the annual report, as this tranche of the meeting is primarily given over to repeating those same key points, via the medium of a carefully managed script.

However, this particular time I began to process what was being said, or more importantly what was not being said. I think what jolted me out of my daydreaming was a line from the promo video that broadcast out across the room saying ““we are focussed on what matters, delivering value to shareholders”. Of course that is the case, as it is with many companies, but it was the message that the Board were keen to ensure we all understood. So they battered us over the head with that message.

It is clear that Rio Tinto, like many of its competitors, has been forced into maximising return to shareholders after some substantial losses in ill conceived purchases at the height of the mining boom, prior to the financial crash. The cock-up of purchasing Alcan cost the last CEO Tom Albanese his job and heralded in Sam Walsh, with a practical ‘back-to-basics’ approach. Therefore the focus of the introductions was all on cost-cutting and debt reduction, which would then return value to shareholders.

And that got me thinking where have I heard this mantra before? Of course, it is in the ‘austerity’ regime of the current UK coalition government. There are the same problems (debt is too high, ‘fat’ must be cut off in order to balance books). Now, those of us living in the UK have been able to see what has happened as a result of the government’s austerity programme. The swingeing cuts have had the greatest impact on the poorest and most vulnerable. Food banks are booming, public sector workers at the bottom have pay freezes. Yet, all the time income disparity is climbing, so the haves (who are orchestrating this policy) are able to protect what they have, while the have-nots (especially those on benefits) are effectively blamed for the banker/politician created crisis and deprived of what little they have.

So, what does Rio Tinto’s austerity look like? Leaving aside the proceeds of sales of assets (which it could be argued should not be sold in a time of a bear market), how are those savings made? It may be there are super-clever management tools that are being used to bring about win-win situations (and indeed I think I heard mention of the application of six-sigma, or some-such other management wizardry). But we all know that in the real world there are few win-win situations (as the poorer majority in the UK are funding out!). As was pointed out by a number of shareholders in matters of executive remuneration, it certainly hasn’t been trimmed from the pay of the higher echelons (with Sam Walsh’s 44% pay rise to over Aus$10 million in 2013). So who can be losing?

Well this is where it is interesting in what wasn’t emphasised in the initial introductions. Normally there are long, glib spiels about the company’s concern for health and safety, the environment and for local communities. This time, I noticed virtually nothing. Unless I drifted off there was a much slimmed down reference to workers’ deaths and accidents, but virtually nothing on environment or communities; I think the only mention of communities was a final statement of how they would, de facto, benefit from the brilliant way that Rio Tinto worked.

This seemed to jar much more with the host of questions from shareholders that focussed on workers’ rights, health and safety, environmental issues and their impact upon local, often indigenous, communities. If you are cutting costs it is not great for the workers, quite literally at the ‘coal face’, and indeed union representatives came to express concerns over down-sizing and an inability of the company to collectively bargain. Treating workers with disdain may seem an enticing way to save money, but will the inevitable industrial action and damaged relations really improve the bottom line of the company? Rio Tinto really needs to consider how it has got to the point where the global union IndustriALL singles it out for a world-wide campaign, and what the effects will be for longer-term (non-management) employee relations. Perhaps, as it boasts of its driverless trucks in the Pilbara, it is dreaming of a workerless future.

On the issue of health and safety, again surely the policy of austerity must be questioned. It is true that in response to questioning the Chair and CEO confirmed that health and safety was a top priority (as interestingly was sustainability in response to another question, which given that maximising shareholder value is the top priority makes you wonder how they deal with all these top priorities!). I do not doubt the organisation takes it seriously, and is trying to minimise injuries and fatalities. But if you have such a high priority on saving money at what point does this take over? One only has to look at the case of BP’s nightmare where the call went out to cut costs, and the result was the tragic ‘avoidable’ Deepwater Horizon incident. I for one would feel happier hearing the Board assure us that safety trumped any desire for cost cutting, which is not the impression I got in their company overview.

Finally, there is of course the issue of the environment and dealing with impacted communities. It is a well known maxim that in hard times for mining the first to go are the ‘fluffy’ corporate social responsibility (CSR) people. They are often seen as a luxury, rather than integral to the business, which is a serious misreading of priorities, and as with the issue of worker relations is simply storing up pain for the future. That is not the much lauded sustainability that the company claims to care about.

It is a real concern that in my many years of going to Rio Tinto AGMs, I have never heard key social and environmental issues so downplayed in the introductory statements. If we are to read the course of the ‘good’ ship Rio Tinto from the calls of the captain, then it looks like it is heading straight for that iceberg on the horizon. If so I trust those shareholders still in the proverbial dining room, enjoying higher dividends now, have their life jackets handy!