Rio Tinto and the Juukan Gorge Cave 2 PDF

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Rio Tinto and the Juukan Gorge Cave Board report Analysis Peter Vu S3807499

Executive Summary This board report analyses the main failures in the ethical decision-making of the mining corporation Rio Tinto, and its decision to destroy the 46,000year-old Aboriginal heritage site within the Juukan Gorge Cave. Additionally, it also uses the concepts and theories of moral approbation, organizational decoupling, stakeholder salience, the theoretical typology of work climates, and the scripts and codes of the organization that contribute to the main issue. These along with several articles and reports point towards the immoral actions of the executive board of Rio Tinto. They manifest the true nature of the corporate culture of this board, that even after analyzing all of their available options decided to “blow-up” this Indigenous Australian sacred site, purely in the interest of profit. It is also clear that improvements must be made in the management of Rio Tinto as a consequence of this case to avoid any future backlash within the mining industry of Australia where it is booming.

Introduction The Juukan Gorge incident is one of the many cases of unethical decision making by an executive board of directors that has been brought to light. What had occurred was the destruction of an Aboriginal landmark which sparked outrage not only from the community standpoint but also from an ethical standpoint. Rio Tinto is one of the world’s leading mining group that focuses on Earth’s rare mineral deposits (Rio Tinto 2020). As a company has had an unhealthy past when it comes to handling ethical issues, for example, they were previously ejected from Norway for “grossly unethical conduct” with its involvement in the world’s largest goldmine (SMH, 2018). What this paper aims to do is dissect and analyze the main causes of the issue at hand as well as the executive decision-making board. This is done firstly through the analysis of the scripts and codes within Riot Tinto and how different workplace stimuli such as rewards and punishment affect the ethical decision making of its employees and directors. Other factors that will be examined will be the cognitive function of these employees and how moral approbation, individual morality, and organizational decoupling as well as stakeholder salience which affected the main issue. Finally, improvements will be suggested to prevent future endangerment to the company as well as the communities and the stakeholders which it affects.

Main Case Analysis Scripts and Codes Gioa (1992) argues that scripts and codes are a crucial factor which leads to unethical decision making. They are a special set of stimuli that provoke an automated cognitive response that hinders the mind’s ability to consider the ethics of decision being made. Scripts (script schemas) in particular are an existing pattern of thought or behaviour which guides an individual through future events using a current means of understanding as a framework. It is from this existing framework that immoral decision-making starts to take ahold of an individual, this can be especially prevalent in bigger for-profit organizations like Rio Tinto where this immoral environment thrives. It is also within this environment where any conscious or subconscious decision to disturb such an environment becomes disregarded, as going against these automated scripts would cause either negative responses or consequences towards an individual within a company. Additionally, codes are an external stimulus that affects an individual’s decision-making ability. In a workplace context, they are a strict set of rules and guidelines one must follow to proactively perform daily work tasks to an acceptable standard. These codes can also affect an individual’s decision-making ability for example dictating whether an action gets rewarded or punished

within a company. Therefore, implicit expectations are formed and relied upon by executives/directors of organizations to generate scripts that are imprinted within the workplace environment and culture, but ultimately within the employees’ minds. Scripts and codes are key in analyzing the organizational decision-making process which had caused the main issue in question. The Rio Tinto chain of command consists of the main board of directors and other smaller boards and sub-committees within the organization. Within this chain of command lies the two main divisions which are the main product division and the communities (Indigenous) relations divisions (Hopkins, Kemp 2020). The heads of the main product divisions are ones that create and manage all of the codes (organization rules and guidelines), whilst the public relations team only provides compliance resources and advice to the main executive board (Rio Tinto 2020). The key script in the Rio Tinto case was the decision to blow up the Juukan Gorge. The investigative article (Walquist 2020) states that there were many other options that the Rio Tinto board could have considered before blowing the mine as “Blowing up the mine was only one of four options that were considered “ (The Guardian 2020). Despite having other options to mine around the gorge, it was ultimately decided based on the fact that the site itself contained “eight million tonnes of high-grade iron ore, with the economic value of $135 million”. It was due to the main core philosophies (codes) of Rio Tinto to mainly make as much profit as possible off the earth’s natural mineral resources that this issue was mismanaged overall. To compensate for the philosophies of the company, the decisionmaking board generated scripts in which to stick to them. It is here where the concept of moral approbation (Jones and Ryan 1998) is also present and states that an individual (a moral agent) desires to be seen as moral by themselves or others around them, judging their own decisions and deciding on them based on the desired moral level. This is extremely relevant in the business context as automating scripts based on the company’s codes and principles avoid the degree of backlash and negative response from the executives of the company.

Organisational De-Coupling and Moral Approbation Jones and Ryan (1998) as previously mentioned, stated that moral approbation is the need to be seen by one’s self and others to be ethical and morally just. Monahan and Quinn (2006) argue that it is the organizational culture and factors which influence the ethical decision-making of its employees. It is through the process of ‘de -coupling’ that management detaches itself from the realities of meeting organizational goals, the organization itself is ignorant towards personalised morals (such as social and cultural goals) and good workplace ethics. Firstly, moral approbation affects an individual’s decision making ability through four different viewpoints: The severity of consequences (more severe consequences confer greater moral responsibility on the agent), moral certainty (greater involvement in the wrongdoing confers greater moral responsibility on the agent), and the extent of pressure to behave unethically (greater organizational pressure to go along with the wrongdoing reduces the moral responsibility on the agent) (Jones and Ryan 1998). This combined with the “bad barrels” argument from Monahan and Quinn (2006)

which focuses on organizational neglect fostered by financial goals being rewarded over adherence to largely symbolic organizational ethical codes and procedures, paints a clear picture as to how the workplace environment affects an individual’s ethical decision making. Both of these theories can be applied to the Rio Tinto case in many aspects. As previously mentioned, the company had four options, the majority of which involved not blowing up the Aboriginal heritage site. But the board of decision-makers were not hesitant when they chose to excavate the value of the high-grade iron ore was worth 135 million dollars, or 2.5% total of the company’s total iron ore produced that year. Using the argument from Monahan and Quinn it is clear that Rio Tinto had in fact chosen to ignore the ethical and moral code (with no remorse) as evident in the quote “That’s why we haven’t apologised for the event itself, per se, but apologised for the distress the event caused.” (Wahlquist 2020). They instead, opted for results and a wider profit margin which is a direct result of the “badbarrels” argument where organizational factors had forced the decision-makers to go ahead with the excavation even when there were discussions about the importance of the site to Aboriginal Culture. From a moral approbation standpoint, the argument of the severity of the consequences of their actions and the extent of pressure which causes unethical decision making. The workplace culture of Rio Tinto and the corporate culture expectations within the organization had caused the separation of moral and immoral actions in the name of profit and making money for the company, this was evident in the tapes which referred to the event of the supposed ‘apology’ made to the Indigenous population as quite ‘galling’ as they were one of the leading resources companies in their respective field (The Guardian 2020). Furthermore, Rio Tinto claims to maintain a high standard of responsibility for Corporate Governance and Responsibility but past evidence has shown otherwise and that it has a reputation for being irresponsible with the matter and the workplace culture it promotes (Industrial Globall Union 2018). Stakeholder salience A stakeholder within a company is defined as any group or individual who can affect or is affected by the achievement of the organization’s objectives (Freeman 1984). The stakeholder salience model identifies and separates the different types of stakeholders within a company into three overlapping categories: legitimacy, power, and urgency. These different types of stakeholders have different types of powers within the company which comes in the form of voting power for example. The importance of this model is that it allows for the many stakeholders within a company to be distinguished and most importantly decides who gets to do what in an organization. Furthermore, it allows us to distinguish the how and why unethical decision making occurs through the framework of these stakeholders and how corporate social responsibility is managed within the company. Within Rio Tinto, there is a range of stakeholders, with the main ones being the executive board at the time of the incident and its chief executive Jean Jacques. This executive board consisted of both dependent and non-independent directors. They also have many other committees and sub-committees as previously mentioned like the relations (Indigenous) and corporate governance committee but also many shareholders which have the power within the organization. The mismanagement of the Juukan Gorge case can primarily be

linked to the management chain and stakeholder salience. Cyert and Match (1963) contend that organizations are made up of smaller coalitions, each with their own disparate demands and changing foci of attention with limited ability to attend to all problems simultaneously. This ideology can be applied in this scenario as the relations (Indigenous relations) board can be considered its own small coalition, fighting against all of the other coalitions to get its point across, quoted “ Indigenous relations must compete with all these other concerns for the attention of the head of corporate relations, and not surprisingly it did not always get the attention it deserved.” (Hopkins, Kemp 2020). It also had product divisions that were at the lower end of the command chain and those that were functional executives always challenged the product divisions team about their decisions (which in this case were the other three decisions to not blow up the gorge). Not only were there internal stakeholders that contributed to this issue but also external stakeholders. Many shareholders had voiced their concerns over the destruction of the gorge as many had concerns with the impact on the company’s image before and after the gorge’s destruction. Overall, the structure of stakeholders and the powers in which they hold were grossly mismanaged by Rio Tinto in this case and it was clear that some improvements had to be made.

Conclusion The general mismanagement of Rio Tinto in this case illustrates how many internal management factors within the company had caused its downfall in the Australian mineral and natural resources sector. Firstly, through the mismanagement of organizational codes and conduct with caused automated scripts within the employee command chain it was decided that this was the only option to go ahead (even when there were three others), these codes were the direct result of the corporate culture expectations of the company to make as much profit as possible. Additionally, the internal workplace culture had also contributed to the moral approbation of the organization’s employees. Again, drawing on the pressures of corporate culture, the employees that were stuck on the lower end of Rio Tinto’s command chain were mentally forced to ignore the moral consequences of their actions and follow along with the executives’ wishes and demands whilst their own were cast aside. Finally, it was due to the uneven spread of power within the company which ultimately led to its decision. Using the stakeholder salience model, we could once more see that even if there were many different stakeholders within the company which had a say in the matter (such as the head of product divisions and other major shareholders for the organization), it was down to the most powerful executives when it comes to major decision-making.

Recommendations To avoid a similar issue in the future there should be action taken within the company, these recommendations are made keeping in mind the previous points which were argued in mind. They serve to ensure Corporate Social Responsibility and Governance is maintained within the company and that moral wrongdoing is reduced to naught. Not only this, but these suggestions also help to keep the power distribution even within the company and to maintain a positive workplace culture/environment. -

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Generating company codes which in turn create a more ethical working environment and allows for employees to make the right moral decision when it comes to the workplace. A ‘script-breaking’ component (Gioa 1992) can be inserted into the workplace which helps to stimulate individual moral judgement and helps with the ethical decision-making process. Minimize the level of organizational de-coupling by creating an environment in which all employees’ morals and values are respected. This can be done by allowing for more of a personal and cultural presence within the companies and teams and holding directors/executives more accountable for their department and ethical practices. Having a more independent presence in the board of directors to review and analyze the main corporate decisions that are made. Giving a stronger presence to the corporate governance board to prevent any future moral wrongdoings of the company towards the outside parties involved. Allow shareholders to veto and vote for certain decisions as shareholder presence for this case was strong but influenced very little of the final outcome. Create other organizational goals and targets that reward ethical decision making rather than basing company principles around profit. Emphasize the consequences of both moral and immoral decision making within the company. Invest more time and effort into the public relations sector of the company and allow them to have more of a presence in decision making and negotiations as it can prevent public backlash for future issues such as this one.

Improvements and Suggestions from Assessment Task 1 Suggestion: Create stronger arguments and points Improvements: I attempted to make my arguments stronger by doing more research and providing more evidence to make my arguments factually stronger. Suggestion: Use a better flow structure i.e. Article X argues point Y, etc. Improvements: Tried to base my structure and flow off the template and feedback provided from Assessment Task1

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Gioia, D (1992) 'Pinto fires and personal ethics: A script analysis of missed opportunities Journal of Business Ethics, Vol.11(5), pp.379-389 Hepburn, S. (2020) Rio Tinto just blasted away an ancient Aboriginal site. Here’s why that was allowed, Available at: https://theconversation.com/rio-tinto-just-blasted-away-anancient-aboriginal-site-heres-why-that-was-allowed-139466 Husted, B. W. (1993) 'Reliability and the design of ethical organizations: A rational systems approach, Journal of Business Ethics, 12(10), 761-769. Jones, T.M. & Ryan, L.V. (1998) 'The effect of organizational forces on individual morality: Judgment, moral approbation, and behaviour , Business Ethics Quarterly, 8 (3), 431-45. Langton, M (2020) We need a thorough investigation into the destruction of the Juukan Gorge caves. A mere apology will not cut it Available at: https://www.theguardian.com/commentisfree/2020/jul/28/we-need-a-thoroughinvestigation-into-the-destruction-of-the-juukan-gorge-caves-a-mere-apology-will-not-cutit?CMP=share_btn_tw Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997) Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts, (Links to an external site.) Academy of Management Review, 22(4), 853-886. Monahan, S. C., & Quinn, B. A. (2006) 'Beyond ‘bad apples’ and ‘weak leaders’ Toward a neoinstitutional explanation of organizational deviance, Theoretical Criminology, 10(3), 361-385. Victor, B., & Cullen, J. B. (1988) 'The organizational bases of ethical work climates (Links to an external site.)’, Administrative Science Quarterly, 101-125. Chicago Rio Tinto (2020) ‘Ethics and Integrity’, available at https://www.riotinto.com/en/sustainability/ethics-integrity Wahlquist, C (2020) ‘Leaked tape reveals Rio Tinto does not regret destroying 46,000-yearold Aboriginal rock shelter to expand mine’ available at: https://www.theguardian.com/australia-news/2020/jun/16/rio-tinto-repeats-apology-forblasting-46000-year-old-rock-shelter-to-expand-mine Wahlquist, C (2020) ‘Rio Tinto did not tell traditional owners blowing up Juukan Gorge site was just one option for mine’ available at: https://www.theguardian.com/australianews/2020/aug/07/rio-tinto-did-not-tell-traditional-owners-blowing-up-juukan-gorge-sitewas-just-one-option-for-mine Hopkins, A, Kemp, D (2020) ‘Has Rio Tinto learn its lesson from the destruction of a Juukan Gorge Caves?’ available at: https://www.abc.net.au/news/2020-09-12/rio-tinto-jean-

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sebastien-jaques-sacked-juukan-gorgecaves/12655942#:~:text=Outraged%20investors%20have%20forced%20the,human%20habit ation%2046%2C000%20years%20ago. Walhquist, C (2020) ‘Juukan Gorge: Rio Tinto blasting of Aboriginal site prompts calls to change antiquated laws’ available at: https://www.theguardian.com/australianews/2020/may/30/juukan-gorge-rio-tinto-blasting-of-aboriginal-site-prompts-calls-tochange-antiquated-laws Chau, D, Janda, M (2020) ‘Rio Tinto boss Jean-Sebastien Jacques quits over Juukan Gorge blast’ available at: https://www.abc.net.au/news/2020-09-11/rio-tinto-boss-jean-sebastienjacques-quits-over-juukan-blast/12653950 Industrial Globall Union (2018) ‘The Ugly Truth About Rio Tinto’ pp. 1-14...