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Rio Tinto’s Albanese becomes latest FTSE boss to give up bonus

Mining group wrote down the value of aluminium division Alcan, bought in 2007 during a record-breaking takeover battle, by .9bn

The boss of global mining group Rio Tinto has become the second FTSE 100 chief executive in as many weeks to voluntarily forego his bonus.

Tom Albanese, who received salaries, bonus and benefits of .97m (£1.87m) in 2010, has said he will waive his bonus entitlement after Rio was forced to take a .3bn charge, largely in relation to its .7bn acquisition of Alcan in 2007.

High raw material costs, stuttering growth in many economies around and stronger than expected competition from Chinese rivals left the aluminium acquisition falling far short of Albanese’s expectations. The company on Thursday wrote down the value of this division by .9bn and said a number of underperforming assets would be sold off.

“Growth in demand for aluminium remains strong but the industry has been running surpluses for the past five years. Chinese production is still tracking internal demand, but has shifted more toward the north west, where stranded coal is being used to generate electricity,” said Albanese.

“As the acquisition of Alcan happened on my watch, I felt it only right not to be considered for an annual bonus this year,” Albanese said. It is unclear what his bonus would have been but his maximum entitlement is £1.03m.

His move follows Royal Bank of Scotland boss Stephen Hester’s decision to waive his bonus entitlement last week following months of mounting pressure from executive pay campaigners and politicians. RBS’s woes, like those of Rio, stem from a record-breaking takeover battle at the peak of the bull markets in 2007.

In the case of RBS the battle was with Barclays over Dutch bank ABN Amro; in the case of Rio it was a tussle with Alcoa over Alcan.

Rio acquired Alcan just two months after Albanese was promoted to become chief executive of the mining group in May 2007. The deal was described by the then chairman Paul Skinner as “transformational”. He told investors the purchase “demonstrated the strength and depth of Rio Tinto’s managerial capability to deliver value to shareholders. Albanese received a 2007 pay package worth .57m.

Rio’s current chairman Jan du Plessis said he fully backed Albanese’s decision to waive any bonus entitlement. “Whilst we have today reported excellent underlying earnings numbers, we also have to recognise that we have taken a significant impairment charge in relation to our aluminium business. As this charge largely relates to the acquisition of Alcan, Tom Albanese and [finance director] Guy Elliott have notified the Remuneration Committee that they did not wish to be considered for an annual bonus and I think that is absolutely right.”

Rio’s net earnings for last year dropped 59% to .8bn as a result of the heavy write downs. However, the group said underlying revenues were up 11% at .5bn, with record .4bn cash flows from operations. As a result, du Plessis announced a 34% increase in Rio’s full year dividend to .45 a share.

Shares in Rio were down 2.26% in early trading at £37.88.

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