Companies have always had a responsibility to their shareholders, and now that responsibility is widening to include all stakeholders – employees, customers, suppliers and regulators – as well as the impact their actions have on wider society – the environment, the local and national economy, tax policy, the local community.
Attending to the needs of all stakeholders will make an enterprise more successful in the long-term, but it’s up to boards to engage with them in a fair and open way.
Ultimately, businesses create value, but that value has to be shared across a range of stakeholders. Companies need to make a strategic allocation of that value across this range of stakeholders, and if they allocate it properly, then tomorrow they will have more value to distribute.
The board should place a strong emphasis on engaging with its stakeholders and treating them fairly, including in financial terms. The board needs to set out, in a clear statement, the nature of the relationship it will seek to develop with each of the principal stakeholders in the business.
For instance, on employee matters, the board should develop clear policies and targets with regard to diversity and inclusion, including gender and ethnic diversity in senior roles, monitor them and report on progress being made towards meeting its goals. If the values are to be seen by members of staff, in particular, as being at the heart of the business, it is essential that they are visibly ‘lived’ by board members and those in senior management positions.
The culture of the business is the glue that holds it together. There is increasing interdependency in the way we behave, and it can tip one way or another very quickly. There will either be a virtuous cycle or a vicious circle. If you get it wrong, it will destroy the business. Our values at Mazars have been engrained as part of our Board Charter below:
This blog is an excerpt of an article, “A very strategic engagement: stakeholders and long-term value” which appears in the Winter 2018 edition of Board Agenda. The full article can be found here.