Governance leaders in UK business and investment have launched a project to ensure UK listed company boards understand the views of their employees and other stakeholders, which should then be factored into their decision-making.
Led by the Governance Institute and the Investment Association, with input from a wide range of stakeholders, the project aims to tackle concerns that the voices of key groups such as employees, customers and suppliers are not being heard at the highest levels of British business.
The two bodies will identify existing best practice and produce 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 2006.
The guidance will identify different approaches to stakeholder engagement for companies to consider. These include the different approaches identified in the government’s green paper on corporate governance reform:
- The ways in which companies can identify non-executive directors with relevant stakeholder experience
- The processes by which boards can receive the views of their key stakeholders
- How training and induction can be used to enhance directors’ understanding of their duties and the interests of, and impact on, different stakeholders.
The guidance, which will be published in the second quarter of 2017, will also offer a set of options for companies to appropriately report how they have fulfilled their duties in this area.
Peter Swabey, policy and research director at the Institute of Chartered Secretaries and Administrators, says: ‘We agree with the government that the views of stakeholders need to be heard by boards. Companies benefit from having constructive engagement with their employees, customers and other stakeholders, and from having a broad range of perspectives around the boardroom table.
‘Many companies already do this effectively, but our guidance is intended to assist those boards that feel the need to act now to improve their engagement with and understanding of the views of their stakeholders, rather than waiting for the government or the FRC to complete any actions they might take as a result of the current consultation.
‘We believe market-led reform is more likely to create effective solutions and, by bringing together the perspectives of company secretaries and investors with input from stakeholders and other experts, we will be able to draw on the existing best practice and develop new guidance that will be practical to implement for companies.’
Andrew Ninian, director of corporate governance at the Investment Association, adds: ‘The investment industry stands fully behind the government’s efforts to create a corporate Britain that is built for the long term, and this initiative illustrates that the asset management industry is at the forefront of improving corporate governance in the UK. Boards have a collective responsibility to make better long-term decisions for all their stakeholders.’
