Why purposeful governance is key to successful corporate stewardship

3 minute read 20 Apr 2021
EY UK
By EY UK

Multidisciplinary professional services organisation

3 minute read 20 Apr 2021
Related topics Board governance and oversight Long-Term Value Public policy
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  • UK Regulatory Radar: November 2020 Update

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Loree Gourley and James King discuss purposeful governance, stewardship and the need for boards to understand their stakeholder priorities.

Three questions to ask:
  • How can boards understand the evolving needs for a broader set of stakeholders?
  • What resources does EY have to support board members?
  • What do boards need to be aware of?

As part of the UK Centre for Board Matters video series on emerging regulatory developments for corporate boards and non-executive directors (NEDs), Loree Gourley, EY’s UK Regulatory & Public Policy Director, and James King, EY’s UK Regulatory & Public Policy Assistant Director, explore how boards can drive long-term value and benefits for their clients and stakeholders by strengthening their understanding of investor and shareholder priorities.

The discussion focuses on three areas EY considers essential for boards in the context of COVID-19:

  1. The need for companies and boards to understand the evolving requirements for stakeholders, including investors.
  2. Board members should bring environmental, social and governance (ESG) issues into the heart of boardroom discussions.
  3. Stewardship is pivotal in challenging corporate leaders on how they are responding responsibly.

Loree and James’ candid reflections provide insight for boards and organisations, particularly as the move to stakeholder capitalism and emphasis on the right kind of corporate stewardship is accelerating, putting boards centre stage.

The revised 2020 UK Stewardship Code brought in a requirement for signatory companies to issue a stand-alone, public stewardship report. As the stewardship reporting deadline is the end of March 2021 for Asset Managers and the end of April 2021 for Asset Owners, this next crop of stewardship reports will demonstrate investors’ commitment to achieving real outcomes around matters critical to driving long-term value and benefits for their clients and stakeholders, including the environment, the economy and society.

As a result, the stakes are high for boards, 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 environmental, social and governance (ESG) factors. However, the benefits are also great for a board who are ready to engage with their investors and stakeholders. By engaging with stakeholders and investors, this can help organisations succeed in the competition for capital and contribute to business reputation, retaining talent and generating long-term value. Yet how can board members better understand stakeholder and investor priorities?

According to Loree Gourley, EY’s UK Regulatory & Public Policy Director, all roads lead back to good, purposeful governance, with four key questions that investors are currently asking:

  1. How much of your board discussion is anchored around your corporate purpose?
  2. How often has your company changed a business decision based on your purpose?
  3. Has your board ever explored the negative consequences that your business might have on society?
  4. How do your employees really feel about your corporate purpose?

About UK Centre for Board Matters:

The EY UK Centre for Board Matters, a programme for non-executive directors and all board-level executives, delivers timely insights on the current issues facing UK businesses. Our programme combines on-demand content to keep board leaders abreast of emerging themes, with networking events to build strong peer relationships. 

If you would like more information, or to join the EY UK Centre for Board Matters, please contact us at neds@uk.ey.com or visit www.ey.com/uk/boardmatters.

How EY can help

Nonfinancial reporting advisory and assurance

Investors, regulators and — more broadly — society are increasingly demanding greater transparency around nonfinancial performance of organizations to assess their true long-term value. In response, businesses must broaden the scope of their reporting and seek new ways of communicating nonfinancial performance.

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Summary

The constantly changing landscape has increased the importance for board members to understand the needs of stakeholders and address environmental, social and governance issues in boardroom discussions. Understanding and anticipating these key factors that concern their investors and shareholders is key to successful corporate stewardship. 

About this article

EY UK
By EY UK

Multidisciplinary professional services organisation

Related topics Board governance and oversight Long-Term Value Public policy
Upvote