My board is considering whether we should take a view on social and political issues. What are the considerations we should debate before making a decision? Should boards have a general stance on this, or take a case-by-case approach?
Companies have long supported social and political issues, with Australian history showing large companies in the banking, pharmaceutical and retail sectors addressing humanitarian issues as far back as WWI. What has changed is the growing demand from stakeholders for corporations and NFPs to take a stand on contested social or political issues. Edelman Trust Barometer and Harvard Business Review research repeatedly shows many staff, customers and investors want to work, buy and invest in companies that care about their position in the community. Before “taking a stand”, it is critical that boards ask a few questions.
Guiding boardroom decisions
Boards are not expected to take a stance or provide commentary on all issues. Organisations are not meant to usurp the role of political parties. Nor is staying silent on matters always appropriate in this climate of rising community expectations. It needs to be a case-by-case approach that asks, is the issue “mission-critical” to the organisation’s operations and consistent with its strategic plans and values?
Key stakeholders
Boards should ask, who are our stakeholders? What are stakeholder opinions? What potential concerns or objections would they have should the organisation take a position?
In a legal opinion commissioned by the AICD, barristers Bret Walker AO SC and Gerald Ng MAICD said that while shareholders/members’ interests are central, directors can also consider a range of stakeholder interests. The potential introduction of Recommendation 3.3 to the ASX Corporate Governance Principles invites directors to think about a wider group of stakeholders than just the company and investors.
A stakeholder governance framework will be critical to help navigate these decisions, with the first step being to identify and prioritise relationships, given not every stakeholder will hold equal importance to the organisation’s position. Importantly, boards and directors need to find ways to engage with stakeholders directly. This will require the board to own — if not co-own with management — key stakeholders, so that they have their finger on the pulse of stakeholder views.
Establishing stakeholder advisory groups that have subject matter experts to the issue could be an important way to draw deeper insights on the matter. Testing stakeholder sensitivity will also be important — a position from an investment bank may be significantly different from that of a retailer given their customer base and footprint in the community.
Apply a risk lens
Boards and organisations should take a risk management approach by asking themselves, is this issue a risk or an opportunity? Is failure to take a position consequential to the organisation? Will there be potential backlash or reputational damage with whatever position we take? This has never been truer than in the age of social media, where stakeholders are becoming louder, more connected and more mobilised in their advocacy and where a misstep could spiral into a reputational crisis.
Implementation and communication
When communicating the position, be authentic — educate and inform stakeholders about why the issue matters to the organisation and how it aligns to their purpose. Importantly, the position should not be used to divert the community’s attention away from other operational or reputational crises. Directors need to also make it clear when they speak up and reflect their personal views or when they are representing their organisation.
Results focus
Boards should have a framework in place to anticipate issues, to have a rigorous process for decision-making and ensure regular discussion of stakeholder matters.
Board assessment of social and political positions will become more strategic and nuanced — which will see a broader spectrum of positions. Social and political positions are no different to the judgement calls and decisions made every day for our organisations.
Taleen Shamlian MAICD is a non-executive director, board adviser, economist, public policy and stakeholder engagement strategist.
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