By Stephen Mayne
When Sir Rod Eddington came up for board election at the 2006 Rio Tinto AGM in Melbourne, I spoke against the move on the grounds he failed to stand up for shareholders at News Corp.
Sir Rod was News Corp's lead independent director and chairman of the audit committee, yet stood meekly by as Rupert Murdoch invoked the disgraceful poison pill in 2004 to fend off rival media mogul John Malone.
News Corp shareholders subsequently sued and won, and Sir Rod copped the biggest protest against a director in the company's history when 122 million of his votes were withheld at the 2005 News Corp AGM in New York.
Fast forward seven months to the 2006 Rio Tinto AGM and chairman Paul Skinner strongly defended Sir Rod on the grounds that during his five years as CEO of British Airways, he had taken it ''from worst to first''. The shareholders seemed to agree, with 787.8 million votes in favour and less than 1 million against.
At that same AGM, Rio Tinto was forced to withdraw a proposed change to its constitution related to class actions after the powerful proxy advisory firm Risk Metrics recommended a vote against. It was the first time in history Rio Tinto shareholders had rejected a board recommendation.
While the average vote for Australian non-executive directors is 96%, Sir Rod won't repeat his 99.87% in favour from 2006 when he again faces Rio shareholders at the dual AGMs in London and Sydney next month.
Indeed, Sir Rod could find himself out on his ear in the greatest humiliation yet for an incumbent Australian director.
Risk Metrics and its loyal institutional clients almost unseated Barbara Ward from the Qantas board at the AGM last November and if they've got any spine they'll attempt the same move against Sir Rod.
Ward and Eddington were both independent directors of Allco Finance Group which collapsed in a debt-laden heap last November.
However, the one thing that could save Sir Rod is his friends in the Chinese Government.
I say ''friends'' because Chinalco is being advised by JPMorgan on its proposed $20 billion Rio Tinto investment which would see its stake potentially double from 9% to 18%. Sir Rod chairs JPMorgan's Australasian business and reportedly withdrew from the deliberations inside the Rio Tinto boardroom due to this conflict.
No Rio Tinto director has ever received more against votes than the 23.82 million that Andrew Gould copped in 2006. But with 748.54 million votes in favour, this was still a thumping Mugabe-esque endorsement of 96.91%.
With control over 119.7 million of the 1.461 billion Rio Tinto shares on issue, the Chinese Government is facing its most interesting global test, in corporate democracy terms.
Do they brazenly start exerting control over Rio's board by voting against directors, especially someone as sensitive as Sir Rod, who is very close to our Mandarin-speaking Prime Minister and now chairs Infrastructure Australia?
There's an argument that Chinalco shouldn't be able to vote at all given remaining board members are unanimously endorsing a controversial special deal that is not available to all shareholders. Sir Rod's JPMorgan gig makes him a special case too.
Institutions remains upset about Chinalco's special deal and it is quite likely the next four largest Rio shareholders, representing 177 million shares or 12% - Barclays, Axa, Capital and Legal & General - will vote against the four directors seeking re-election as punishment for the Alcan disaster and the failure to engage with BHP Billiton during the takeover bid.
However, Risk Metrics and other proxy advisers might choose to only target Sir Rod, given his chequered record at News Corp, Allco and even Ansett, given he quit one year before it collapsed in 2001.
If this happens, Sir Rod will probably need the Chinese Government to save his job.
Sir Rod has long been familiar with Chinese business practices since his stint in the 1990s running Cathay Pacific out of Hong Kong.
Indeed, he still sits on the board of Hong Kong-based China Light & Power, which is one of Australia's biggest power generators through TRUenergy.
Sir Rod was also quoted in on Saturday taking a shot at executive termination payouts.
Talk about hypocrisy. You see, Sir Rod was on the four-man News Corp compensation committee back in 2003-04 when chief operating officer Peter Chernin's outrageous five-year contract was agreed.
Any sane person in Chernin's position would have quit this year because it triggered a $US40 million payout, plus a lucrative deal to supply at least 12 films based on the most generous contract News has with any film supplier in 2004.
And Sir Rod now has the gall to say: ''I didn't get a golden goodbye. I would never have accepted one. I wouldn't expect it to be in the contract. And my view is it's nonsense, really. You don't need to put it in there.''
OK, we all know the Chernin contract was probably a Rupert handshake special, but why then spend the past six years on the News Corp remuneration committee if you think golden handshakes are a rort?
The battle over Sir Rod's Rio Tinto board seat really should have been avoided because Australia's busiest non-executive director has been anointed as the next chairman of the ANZ Bank. Having promised to lighten his ridiculous workload, why stand again for the Rio board?
How Sir Rod will chair ANZ in between mapping the Rudd Government's huge infrastructure program, keeping Rupert Murdoch on track, saving Rio Tinto and luring Tiger Woods to Melbourne in his role as chairman of Melbourne Major Events is anyone's guess.
Heaven forbid, he's even a director of John Swire & Sons Pty Ltd, the Australian arm of the British trading house that owned the ship which caused Queensland's oil slick (and still owns Cathay). This is a man who just doesn't know how to stay out of trouble.
Even if he survives for another term at Rio Tinto, I doubt he'll actually land the ANZ chairmanship.
It's bad enough that ANZ reportedly lost $30 million in the Allco collapse, but the Allco administrator last week highlighted a series of questionable related-party transactions.
One in particular should be troubling Sir Rod. Lest there be any confusion, let's quote from the McGrathNicol creditors report (see report here) on the $52 million loan by Allco Finance Group to the Allco Principals Trust - the vehicle through which David Coe and other senior executive directors held some of their Allco shares:
Sir Rod was one of the four independent directors at the time and would have to be feeling a tad uncomfortable about Allco shareholders dropping $52 million, lending company funds to the directors to stop them from getting margin called on their personal stakes. Clearly, Sir Rod either approved the loan or wasn't told - and as a member of the audit committee this is troubling on both fronts.
December 2007 was a big month for Allco. The notorious Rubicon acquisition was approved by shareholders on December 12, the loan agreement for APT's $50 million to avert margin calls was dated December 18 and Rubicon settled on December 20, when Gordon Fell and David Coe shared in about $40 million of cash.
A Commonwealth Bank director told me last year that if he was an Allco director in 2008, it would have consumed all his energies.
Given Sir Rod's workload, this simply couldn't have happened. It will be very interesting to see if Risk Metrics and Rio Tinto shareholders decide to make an example of him next month.
Will the Chinese Communists save Sir Rod's bacon and what will the vote mean for the ANZ chairmanship? Stand by for a fascinating battle until Rio's Sydney AGM on April 20.