Rio Tinto plc and Rio Tinto Limited have a common board of directors. The principal role of the board is to provide leadership within a framework of prudent and effective controls that enables risk to be assessed and managed.
Our directors are also collectively responsible for the stewardship and long-term success of the Group. Through the independent oversight of management, they are accountable to shareholders for the performance of the business. In performing this duty, the board recognises its wider responsibility to the interests of employees, customers, suppliers and other stakeholders as well as communities and the environment. The board also recognises the desirability of maintaining a reputation for high standards of business conduct.
Role & Responsibilities
Rio Tinto’s Board Charter sets out the role, responsibilities, structure, composition and conduct of the Rio Tinto board.
A formal Schedule of Matters reserved by the board has been established by the directors.
Responsibility for day-to-day management of the business is delegated to the Chief Executive and through him to other members of the Executive Committee under a Group delegation of authority framework. A number of management committees support the Chief Executive in the performance of his duties.
Selection, Appointment and Election of Directors
Our board comprises directors drawn from a wide range of professional backgrounds and geographic areas. On behalf of the board, the Chairman leads the development of the Group's diversity and inclusion strategy. The board supports the principle of diversity and inclusion and the implementation of this strategy. The board seeks to continually evolve its membership by seeking Non-Executive Directors with diverse and complementary skills and perspectives as well as experience which reflects the geographical spread of the Group's operations. The board regularly reviews its corporate governance practices, including how the director selection and appointment process takes into account the board's desired mix of skills and diversity.
The Nominations Committee, headed by the Chairman, reviews succession plans aimed at maintaining a mix of skills, knowledge, experience and diversity on the board and the Executive Committee.
This review takes into account the challenges and opportunities facing the Group, and includes evaluating the balance of skills, knowledge, experience and diversity currently on the board and Executive Committee. This evaluation helps to identify the necessary and desired profile of potential candidates.
The Nominations Committee also oversees the recruitment process, ensuring it is formal and rigorous. This includes constructing shortlists, comprising candidates from diverse backgrounds and conducting appropriate background and reference checks. The Committee engages external recruitment consultants to conduct searches and executive evaluations. Following a final review of short-listed candidates, the Committee makes recommendations to the board.
Any director appointed by the board holds office only until the next annual general meeting and shall be eligible for election by shareholders. All directors are expected to submit themselves for re-election at the annual general meetings each year.
Non-Executive Directors are generally expected to serve on the board for at least six years and would not serve more than nine years, but may seek re-appointment with shareholder approval after nine years provided the Nominations Committee concludes they remain independent in accordance with the requirements set out below.
Rio Tinto has a Group-wide policy, which the board fully endorses, on inclusion and diversity, including during recruitment. The same recruitment principles are applied in relation to board-level positions, whether executive or non-executive.
The board sets pre-defined and objective criteria for candidate selection at the outset of all recruitment exercises, and values diversity in its broadest sense when considering appointments, seeking to identify and secure the best candidate available in the market against those criteria. Further information on our Inclusion & diversity policy, together with data on the proportion of women employees and board members as at 31 December 2018 is set out in our 2018 Annual Report.
It is important for each Non-Executive Director to bring an independent perspective to the board's deliberations. On behalf of the board, the Nominations Committee assesses the independence of each Non-Executive Director against an independence framework combining the requirements of the Code, the ASX Principles and NYSE Standards.
The board is satisfied that all of its Non-Executive Directors are independent in character and judgment and are free from any relationships (material or otherwise) or circumstances that could create a conflict of interest.
Board Performance Evaluation
A formal and rigorous annual review of the performance of the board, its committees, the Chairman and individual directors is undertaken, with the results used to drive continual development of individual directors and improvement in effectiveness.
In 2018, the board engaged Lintstock to undertake an externally facilitated evaluation, which covered the following topics: board composition, expertise and dynamics; management of meetings and board support; strategic oversight; risk management; personal development; and priorities for change. Lintstock is a specialist corporate advisory firm with no other connection to Rio Tinto.
The results of the board and committee evaluations were discussed by the board and each respective committee and a series of action points were agreed. The chairman is responsible for the assessment of each individual Non-Executive Director’s performance and contribution. In addition to the review by Lintstock, the Chairman met with each Non-Executive Director to review their performance and training needs.
The Non-Executive Directors, led by the Senior Independent Director, are responsible for the performance evaluation of the chairman. Lintstock provided a report to the Senior Independent Director who, in turn, met with the Chairman to provide feedback based on the report and input from individual directors.
The performance of Executive Committee members, including Executive Directors, is continually evaluated as part of the Group's performance evaluation cycle.
Further information on the annual performance evaluation can be found on page 86 of the 2018 Annual Report.
Remuneration for Non-Executive Directors
Our policy states that the Chairman should be remunerated on a competitive basis and at a level which reflects his or her contribution to the Group, as assessed by the board. The Remuneration Committee determines the terms of service, including remuneration. The Chairman has no part in the setting of his or her fees and is not present at any discussion with the Committee regarding remuneration.
The Chairman receives a fixed annual fee and does not receive any additional fee or allowance for either committee membership or chairmanship, or for travel. More details about the Chairman’s remuneration may be found in the 2018 Annual Report section entitled Remuneration Report: Remuneration policy extracts.
Fees paid to Non-Executive Directors reflect their respective duties and responsibilities and the time required to be spent by them so as to make a meaningful and effective contribution to our business.
Non-Executive Directors' fees and other terms are set by the board upon the recommendation of the Chairman’s Committee. Non-Executive Directors receive a fixed annual fee. This comprises a base fee, committee membership or committee chairmanship fees, as applicable, and allowances for attending meetings which involve medium or long-distance air travel.
The fees payable to Non-Executive Directors are subject to review by the board on the recommendation of the Chairman's Committee.
More details about the Non-Executive Directors' remuneration may be found in the 2018 Annual Report in the section entitled Remuneration Report: Remuneration policy extracts.
Shareholding Policy for Directors
Shareholding Policy for Executives
We recognise the importance of aligning our executives' interests with those of our shareholders. Our Executive Committee is therefore expected to maintain a meaningful shareholding in Rio Tinto shares. The Chief Executive is expected to reach a share ownership equivalent in value to four times his base salary over five years. The Chief Financial officer and all other members of the Executive Committee are expected to reach a share ownership equivalent in value to three times their base salary over five years.
Further details about our share ownership policy for executives is available in the 2018 Annual Report section entitled Remuneration Report: Implementation Report.
Shareholding Policy for Non-Executives
The board recommends that Non-Executive Directors be encouraged to build up a shareholding within three years of their appointment equal in value to one year's base fee.
Further details about the Non-Executive Directors' share ownership levels may be found in the 2018 Annual Report in the section entitled Remuneration Report: Implementation Report.