Governance leaders in UK business and investment are launching a joint project to provide guidance on how the boards of the UK’s top companies can better reflect the views of their employees and other stakeholders in their decision making, with the aim of issuing voluntary guidance ahead of the outcome of a government consultation on improving governance
The move follows the release of a government consultation, Corporate governance reform, which closes for comment on 19 February 2017.
Led by ICSA: The Governance Institute and the Investment Association, with input from a range of stakeholders, the project is tackle criticism that the voices of key groups such as workers, 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 and outline practical steps for boards to take to improve engagement.
Issues will focus on how companies can identify non-executive directors with relevant stakeholder experience; methods boards currently use to receive the views of key stakeholders; and how training and induction can be used to improve directors’ understanding of their duties and the interests of different stakeholders.
The guidance will be published by June 2017 and will set out options for companies to appropriately report how they have fulfilled their duties in this area.
Peter Swabey, policy and research director at ICSA: The Governance Institute, said: ‘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.’
Andrew Ninian, director of corporate governance at the Investment Association, said: ‘Boards have a collective responsibility to make better long-term decisions for all their stakeholders. Our joint guidance will be designed to ensure that the broadest range of views and perspectives are heard around the boardroom table.’
