Unpacking Stakeholder Governance

Our planet and its inhabitants are crying out to protect and restore its natural beauty and its life giving resources.

Success of the EU’s proposed Green Deal depends on businesses considering the planet as a stakeholder. Without a vibrant planet, we cannot support healthy communities nor can we sustain business.

Moreover, people’s livelihoods depend on fair treatment, open access to opportunities and respect for the impact of business on their communities. By intentionally placing society as a stakeholder, the social contract between business and society can be repaired.

Placing Directors’ Duty of Care in Stakeholder Governance

The European Commission’s consultation on Sustainable Corporate Governance focused on two key areas: Duty of Care of managers of companies and the Due Diligence of a company on its suppliers.

We can define stakeholders as all those who either contribute to, and/or are affected by the business and therefore have a “stake” in it.

While the idea that companies are responsible for their impact on the world may seem like a no-brainer in this day and age, there is resistance, confusion, concerns and some fear to such a proposal.

Our challenge: Dominant business thinking remains profit-led, and the language around stakeholder governance and what it might mean for leadership’s own liability isn’t so clear.

To address these concerns, we need to prove that stakeholder governance is possible, beneficial in the long-term, and that there are best practices for implementing it.

Common Myths About Shareholder Primacy

5 questions

But how do stakeholder governance and management work in practice?

  • Measuring stakeholder impact that is not the responsibility of directors or valued by investors will result in the standardized reporting of the failure to create stakeholder value.
  • Developing a culture of interdependence not reflected in stakeholder management and governance is wishful thinking and sloganeering that ignores incentives and power
  • Adopting stakeholder governance without management systems and the culture to reinforce progress will amount to little more than glorified mission statements

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