How boards can better understand their stakeholder priorities

To drive an organisation’s long-term value, boards need to find ways to strengthen their understanding of investor and shareholder priorities.  

The COVID-19 pandemic has shone a light on what businesses ‘stand for’, emphasising the importance of a company’s purpose and highlighting the importance of understanding the needs of both shareholders and investors.

This move to stakeholder capitalism and emphasis on the right kind of corporate stewardship is accelerating, putting boards centre stage.  The role of business in defining the most pressing issues of our time, from climate change to social inequality, is under increasing scrutiny. Investor expectations are also rising.  Driven in part by regulation and in part by the need to generate sustainable long-term returns, investors are increasingly focused on environmental, social and governance (ESG) factors. making these more and more important in attracting new and retaining existing capital.

The stakes are high, with shareholder dissent, lack of access to capital and reputational damage – at both company and individual board member level – the potential consequences of a failure to properly consider and to take action on ESG factors. But the benefits are also great for a board who are willing to engage more fully with their investors and stakeholders. Doing this can help organisations to succeed in the competition for capital, and to improve reputation of the business, retaining talent in an organisation and generating long-term value. But how can board members better understand stakeholder and investor priorities?

Bring environmental and social issues into the boardroom.

The COVID-19 pandemic has brought environmental and social issues into the heart of investment objectives for many asset owners and retail investors, and increasingly into the core investment processes of investment managers. By considering this at board level, organisations can meet the concerns of a broader range of stakeholders and investors. These issues can have a material impact on a company’s reputation.  It is also rare that a social or environmental issue can arise without an associated governance concern.

Better understand investor expectations

Our Centre for Board Matters team works closely with boards and investors to identify the greatest areas of concern for investors, and we've created a set of questions for investors to ask, and boards to answer, that focuses on environmental, social and governance issues.  Considering areas such as social impact and human capital from an investor’s perspective will help board members offer effective stewardship that addresses investor concerns, and be better prepared in advance of the AGM Season.  

Explore and anticipate areas of potential shareholder concern

A constantly changing landscape, such as that created by the pandemic, creates a significant challenge for board members to keep abreast of new policy issues. We produce a quarterly Regulatory Radar provides a visual overview of upcoming regulatory milestones in the UK, highlighting their impact and relevance to boards, and likely timeframe.   Each edition visually highlights mega trends and the policy undercurrents that sit beneath them, with trends such as geopolitical shifts, purposeful governance and reporting, Fourth Industrial Revolution and the rise in stakeholder capitalism. Understanding complex issues such as these and the likely impacts they may have on businesses is key to anticipating and addressing potential areas of concern.

As investor and stakeholder priorities take centre stage for boards, the stakes are high, but so are the benefits. If boards take action today to engage with these issues, they will be equipped with valuable insights and practical strategies which can generate long-term value.