MATT LEVINE: Rio Tinto and the great Mozambican coal mine disaster
This week the Securities and Exchange Commission brought a fraud case against Rio Tinto plc and two of its former executives 'for inflating the value of coal assets acquired for $3.7 billion'
There is a certain rather exhausting set of characteristics that you would expect to find in successful chief executive officers. They dream big. They relentlessly pursue their goals. They have high expectations of their subordinates, demanding total loyalty and commitment and effort and creativity. They think outside the box. They don't take no for an answer.There is a problem with this list of characteristics, beyond how exhausting it is. Imagine the CEO of a mining company that buys a giant coal mine in inland Mozambique for $3.7 billion, and then finds out that there's no way to get the coal to the coast for shipment. "Sorry boss," say his subordinates. "That mine is worthless now." How would you expect him to react? Well of course he is going to demand that the subordinates find a way to get the coal out. Of course he is going to continue to believe that the mine is worth more than the $3.7 billion he paid for it. Of course he is not going to change his mind just because the go...
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