The bursting of two dams at the Samarco iron ore mine in Brazil means there is another corporate scandal facing big business. The Anglo-Australian mining company BHP Billiton and its Brazilian partner Vale have been fined almost £50m by the Brazilian government after a deadly mudslide at their jointly-owned mine.
The two companies could have to fork out $1bn (£657m) in clean-up costs – and probably more in lawsuits and compensation – and the disaster has the potential to be as damaging, at least in terms of reputation, as BP’s Deepwater Horizon disaster of 2010 and the Volkswagen emissions crisis.
The reason the dam burst is yet to be confirmed, but the locals in Brazil are furious with BHP and Vale and there have been allegations of negligence and human error.
It may seem odd to link Samarco to a £71bn beer merger, but both the mining disaster and this week’s deal between AB InBev and rival brewer SABMiller to create the so-called MegaBrew throw light on the way companies do not seem to be held to the same standards on employee welfare as they are to shareholder welfare.
The SAB deal demonstrates how first and foremost the chief executive of a FTSE 100 company is concerned with delivering value to shareholders.
Once AB InBev had tabled a bid that SAB directors felt valued the company at a fair price, the deal was a sure thing. But why should protecting the interest of shareholders overwhelm the interests of employees? SAB’s workforce now face joining a company with a completely different culture, one renowned for cutting costs – and therefore jobs. Is this really in their best interests?
This is not a slight on Alan Clark, the chief executive of SAB, but on a culture that has been allowed to develop in the UK that makes it the ultimate responsibility of directors to protect the interests of their shareholders.
This is not actually what the law says. It says the first responsibility of a director of a limited company is to “try to make the company a success, using your skills, experience and judgment”.
The corporate governance code says the board is “collectively responsible for the long-term success of the company”.
This could be interpreted in many ways. Of course it is important to ensure shareholders enjoy the benefits of investing in the company, they are the owners. But should the views of a hedge fund that bought a stake in the company yesterday be more important than those of a worker who has been at the company for 25 years?
It is surely odd that a chief executive can come under more pressure over cutting a dividend than for seeing a disaster such as Samarco strike at one of its mines.
