It really is awfully decent of Tom Albanese. Al’s decided that he can’t justify taking his bonus this year, so he’ll have to rub along on his basic £907,000 – assuming he’s also waived the £1.3m in “other payments” and the £1.7m long-term bonus he got in 2010. This contrition towards the shareholders of Rio Tinto is the chief executive’s way of acknowledging the disaster that was the $44 billion acquisition of Alcan in 2007.

We rejoice at a sinner that repenteth, of course, but giving up the odd $2 million hardly compensates for the damage this stupid purchase caused to Rio’s shareholders. It practically brought the business to its knees, helped precipitate a hostile takeover attempt, and panicked the board into a one-sided deal with the Chinese which only determined opposition from the shareholders managed to stymie. Rio has finally decided that the Alcan pretence can be sustained no longer, and has written the cost down by $8.9 billion, or about 4000 times as much as the foregone bonus.

Considering that this series of blunders came against the background of a once-in-a-lifetime boom in commodity prices, it’s quite an achievement. Yet Albanese has sailed through, and still waffles on cheerfully about a “strong set of results”. If you ignore the Alcan fiasco, he’s right. Rio is even starting to give a meaningful slice of profits to the shareholders, and has also decided not to keep paying some of them to go away at the expense of those who remain, by scrapping its share buy-back programme.

The aluminium stain will not be easily erased. Albanese’s comments on the metal suggest that Chinese production will exceed demand. Yet late last year, Rio announced ity was spending $2.7 billion upgrading a smelter in British Columbia. For the money, it will get 140,000 tonnes of extra capacity, an investment described by a competitor as “economic madness”. Not for the first time, us shareholders will be thanking the money pit that is the Pilbara iron ore prospect. If only Tom had stuck to the knitting…

(Corrected for typo, Feb 10)

Advertisements