Stakeholder governance principles, often referred to as ESG (Environmental & Social Governance), have been on the rise over the last few years.   While some have politicized this concept, it’s really a natural evolution of the role of the board to consider the impact of decisions it makes on all stakeholders (not just shareholders).  This is not new. And, most successful CEOs and business leaders would agree that understanding and engaging with your stakeholders is simply good business practice. 

What has changed is the demand for directors, not just executives, to have a deeper understanding and insight into what matters to stakeholders.  It also means boards may be held to a standard in the future for how well the corporation engages and considers stakeholders impacted by it versus just financial value to shareholders.  This means boards must discuss and learn about what matters to stakeholders to clearly define “Stakeholder Values.”

According to NACD’ s annual director survey, ESG is becoming commonplace in the boardroom, although not “high value” like other areas such as audit, succession planning, and growth strategies.   Nearly 80 percent of public-company boards now engage with ESG issues including linkages of Stakeholder Values to strategy and risk.  Also, discussions with investors focus on elements related to human capital and diversity.   

In 2018, Larry Fink, CEO of Blackrock, wrote a letter to other CEOs to pursue a purpose beyond profits and consider all stakeholders.  He called for purpose and profit, exemplifying a new era for corporations in an age of corporate social responsibility.  CEOs from Apple, JP Morgan and many other high-profile companies chimed in to agree. 

Most of these issues deal with the concept of “tone at the top”, meaning the board along with the CEO help set the tone or culture of the organization to align with Stakeholder Values.  All of these ESG issues deal with culture.  What is valued in the company?  How do people treat each other?  How do you succeed and get ahead? 

It’s a difficult time to manage these issues at the top.  Failure to address perceived failures anywhere in the organization can illustrate a lack of sensitivity to issues important to many of your stakeholders.  And, yet there is a point where leaders must be practical and realistic about succumbing to an angry Twitter mob and the dangerous precedent that can set.

This is not easy for leaders.  For almost all of the ESG issues there are divergent viewpoints and research and statistics on which those viewpoints rely.  In the boardroom, there is a responsibility to hear all of those viewpoints, but then make appropriate decisions about the culture of the company to best meet the needs of your stakeholders:  employees, customers, vendors, strategic partners, shareholders and the community you serve.    There are many strategies to understand stakeholder values.  It starts with a simple set of questions and discussion amongst the board.  What follows are a few questions you could ask in your next board meeting.  If you find yourselves uncertain of the answer, it’s time to conduct a more thorough review.  Consider this exercise: 

  • Define your stakeholders, who are they, what subsets of these groups do you serve?

    • Employees

    • Customers

    • Vendors

    • Strategic Partners

    • Communities you serve

  •  What do they value, what matters to them, what concerns them, how do you meet their needs and values?  Consider the following areas:

    • Environmental

    • Climate change

    • Carbon footprint of the company

    • Natural resource management

    • Waste management

    • Biodiversity

    • Animal wellbeing and testing

    • Natural and man-made disaster responses

    • Sustainability programs

  • Social & Political

    • Human rights and supply chain

    • Labor relations

    • Employee diversity and inclusion

    • Product safety and quality

    • Future of work

    • Employee health and safety

    • Pandemic preparedness

    • Employee crisis management

  • How do you meet the needs of your stakeholder values?

  • How do you incorporate this into your boardroom discussions?

  • When making decisions, do you ask how they impact your stakeholders and what matters to them?

  • Do you survey your stakeholders through an outside party?

    • Consider using a 360-survey approach with customers, employees and vendors to better understand what issues they face and how your actions impact them. 

  • What happens if you anger these groups?

  • What happens if you don’t meet their needs? 

  • What happens if you mobilize these groups to work toward your goals and objectives?

  • How will you respond in a crisis if you violate a key stakeholder value?

  • How do these values align with your business strategy?  

  • How can you improve connection points and engagement with stakeholders?

  • Do you cave to an angry group?  What will keep you from being a continual target to anyone who doesn’t like something you do as an organization? 

  • Do you allow politics in the workplace?  What are the pros and cons of that choice?

  • How do you keep a pulse on what matters to your stakeholders?

 This is just a starting point for robust discussion.  If your board hasn’t carved out time to discuss these issues, consider setting up an off-board meeting virtual call to engage in a discussion of these questions.  And always ask yourself the important question:  “how do you know”? 

If you are interested in a keynote, workshop or facilitated discussion on emerging technologies, future trends, cybersecurity or cultural shifts for your next board meeting or executive retreat, contact me at jwolfe@consultwolfe.com or 513.238.4348.