Rio Tinto's chief executive Tom Albanese is to forgo his bonus for 2011 as retribution for his disastrous acquisition of the Alcan aluminium business.
Against a backdrop of rising opposition to "rewards for failure", Albanese, who received a $1.6 million (£1m) bonus in 2010, decided that he was not eligible for a top-up to his $1.4m salary as he revealed that Rio Tinto was taking an $8.9 billion writedown of Alcan.
This represents nearly a quarter of the $38bn Mr Albanese paid for the business when he bought it at the top of the market in 2007.
The charge plunged Rio Tinto into the red during the second half of 2011, while dragging down its full-year profits by 59 per cent to $5.8bn.
"As the acquisition of Alcan happened on my watch, I felt it only right not to be considered for an annual bonus this year," Mr Albanese said. The chief financial officer Guy Elliott also said he would forgo his bonus for 2011, after taking home a $1.3m top-up to his $1m salary in 2010.
In addition to waiving their bonuses, the pair sought to appease their investors by announcing a 34 per cent hike to Rio's full-year dividend to 145 cents a share.
The Alcan writedown was forced upon Rio amid a 12 per cent decline in the aluminium price over the past year. At the same time, aluminium producers have been squeezed by growing supply from China and wage inflation, while the cost of the energy-intense production process has soared in line with utility prices.
Mr Albanese said: "Uncertain macroeconomic conditions together with stronger currencies in some regions and high raw material costs will result in impairments of our aluminium business."
In November, Rio Tinto said it would sell 13 aluminium businesses in Australia, Europe and the US, noting that "copper, coal and other Rio Tinto products are holding up, with the exception of aluminium which is now priced well below the industry's marginal cost of production". Rio also said it intends to close the Lynemouth aluminium smelter in Northumberland.Reuse content