Aligning stakeholders and boards when making risk decisions

aksaroya —  5 September 2012 — Leave a comment

By James Bonner, independent sustainability consultant

Engaging with, and accounting for, wider stakeholders – a process of understanding, taking into account, and reacting to the needs and preferences of groups in in society who might affect, or be affected by, organisations – is an activity that many companies have integrated into their business strategy.

Implementing methods and systems to understand the needs of both internal and external stakeholder groups to an organisation, and those with financial and non-financial interests, can have significant benefits. Managing and developing positive relationships with shareholders, employees, customers and suppliers can contribute to and improve the productivity, value and sales of an organisation. Additionally, understanding and co-operating with the needs and wishes of wider stakeholders such as the government, local communities and non-governmental organisations (NGOs) can enhance the reputation of an organisation’s brand, reduce the risk of being targeted by external pressure groups, prepare for changes in regulations and legislation, and, fundamentally, improve the long term sustainability of a company.

Corporate governance frameworks and practices are developed by organisations in an attempt to ensure that their management and boards incorporate and balance the different needs and perspectives of shareholder groups, and their interests, into decision making and business strategy. It is apparent that there will be different, and sometimes contradictory, perspectives and priorities on certain issues between various groups (e.g. shareholders and management may have different perspectives whether to expand a business, or focus on short-term profits), or, in fact, within certain stakeholder groups (e.g. an animal welfare NGO may have different, or conflicting, priorities/perspectives to a human welfare NGO with regards to a topic like animal testing of pharmaceuticals). Managing these differences and conflicts is a significant part of the corporate governance process.

The following table is an introduction to various stakeholder groups that are relevant to many organisations, their typical overarching areas of interest, and some areas where they might not entirely agree, or indeed, conflict. The list of stakeholders, their interests, and example priority differences/conflicts provided here are not exhaustive or complete- but serve to introduce/stimulate issues around this topic.

* While not a ‘group of people’, the natural environment can, nonetheless, be considered as an important stakeholder, who can significantly affect/be affected by, an organisation.

This blog post intends to primarily support ACCA’s Accounting for the future session ‘Thinking Alike: getting boards in tune with their stakeholders’ on Monday 8 October by introducing some of the perspectives of different stakeholders on the issues that organisations and companies might impact and depend upon- an issue which will be discussed in greater detail in the session. Additionally, a number of other presentations during the conference relate to the themes covered in this blog post:

8 October
09:30-10:30 Thinking alike: getting boards in tune with their stakeholders
9 October
12:30-13:30 Inclusive and integrated – the future role of the CFO
10 October
15:00-16:00 Practical workshop: active ownership

Further information:
While with a global level focus, and stakeholder engagement in intergovernmental processes, Stakeholder Forum are, nonetheless, a good group to follow to understand the perspectives of wider stakeholder groups.
Follow the Stakeholder Forum on Twitter

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