Majority of boards consider wider stakeholder views but recognise there is room for improvement

 

 

Our poll out today in conjunction with the ICSA: The Governance Institute, finds that 73% of organisations polled actively consider the views of their wider stakeholder base. Just 11% of respondents feel that their boards do not.

 

Whilst the majority of responses were positive about the amount of stakeholder consideration given, some people qualified saying that ‘The views of the wider stakeholder population are taken into account for a narrower range of decisions.’ with the “big decisions” taking preference over less high profile work.

 

When asked how their company captures and considers employee and other stakeholder views, a wide range of practices were identified, such as employee and customer surveys; feedback; test environments; focus groups; roadshows; and regular meetings with key investors.

Some recognised that there was room for improvement with one respondent classifying wider stakeholder engagement as being done ‘Inadequately. Stakeholder views appear to be limited to those who are accessible in the City only, hence institutional shareholders, lenders and senior managers are heard to the exclusion of others’. Others felt that their companies dealt with engagement well: ‘We have a staff consultative committee that is involved in decision making, we have regular staff surveys and the board meet the staff at regular meetings. We also have a vigorous board stakeholder engagement plan for each member.’

 

Questioned about what companies could do to better improve their stakeholder engagement, responses ranged from openness and transparency, and increased use of social media to:

 

  • Directors needing to spend more time with the business and speaking with stakeholders in the communities that the business works in
  • By continually reviewing their stakeholder base and working out how to engage with individual stakeholder groups and evolving their strategy
  • Allowing sufficient time to receive and consider stakeholder views before decisions need to be made
  • Putting employees higher up the list of priorities; if they are on side then it will help with other stakeholder engagement
  • By making them and the advisers believe the need to better comply with s 172 which frankly is widely ignored.

 

‘The recent Business, Energy and Industrial Strategy Select Committee’s report on corporate governance suggested that companies should consider establishing advisory panels that could include workers, consumers and suppliers to help foster collaboration and dialogue as part of efforts to improve the relationship between boards and company stakeholders,” says Peter Swabey, Policy and Research Director at ICSA: The Governance Institute. ‘It is encouraging to see that 73% of the organisations that responded to our poll already consider the views of their wider stakeholder base. It is worrying that 11% do not, however, and disconcerting to read that directors and advisers should comply with Section 172 of the Companies Act 2006 more.

 

‘Directors have a legal duty to have regard to the interests of all stakeholders and it is imperative that boards do so. It is a vital part of the decision-making process and we are working closely with the Investment Association on a joint project to record good practice and so help UK PLC boards better understand the views of their employees and other stakeholders. We will be publishing practical guidance to enhance understanding of the interests of employees and other stakeholders, in accordance with board duties under Section 172 of the Companies Act this summer.’

11 April 2017

 

 

written by Jon Moores
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