Governing stakeholder relationships
This chapter on stakeholder relationships could be named “The governance of reputation”.
The primary emphasis of this chapter is on protecting the company’s reputation through the management of the company’s relationships with its stakeholders.
Principles
The governance principles in this chapter urge the board and company to:
> Appreciate that stakeholders’ perceptions affect a company’s reputation;
> Proactively deal with stakeholder relationships;
> Ensure the equitable treatment of shareholders;
> Strive to achieve the appropriate balance between its various stakeholder groupings; in the best interests of the company;
> Ensure that disputes are resolved as effectively, efficiently and expeditiously as possible; and
> Build and maintain stakeholder trust and confidence using transparent and effective communication.
The Board’s Role
The board’s role is to identify key aspects of stakeholder engagement which need to be managed and then to delegate the management of these aspects to the company’s management.
Following this delegation of authority, the board must ensure that it regularly monitors that management is carrying out its instructions according to expectations.
Such “key aspects” include:
> Communication guidelines that support a responsible communication programme;
> “Mechanisms and processes” to support stakeholder engagement and interaction;
> “Complete, timely, relevant, accurate, honest and accessible” information provision; and
> A formal dispute resolution processes for internal and external disputes.
Unusual policies
Governance policies, as developed by a board, are intended for public scrutiny – they are aimed at declaring the board’s intentions with respect to various governance matters concerning the company.
Policies regarding stakeholders, according to King III however, could be treated differently.
Chapter 8 indicates that:
The board should consider whether it is appropriate to publish its stakeholder policies.
GovN
Candor’s governance product, GovN, applies a consistent, systemic approach to King III and therefore provides a template governance policy for stakeholder relationships.
This decision was taken, not due to inflexibility of approach, but rather with the express understanding that a consistent, systemic approach precisely underpins a key principle in this very chapter, principle 5:
Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence
Expectations of management
Once the appropriate authority has been delegated, management are expected to:
- Develop a strategy and formulate policies
for the management of relationships with each stakeholder grouping.
Management will also then be expected to act on the key aspects as identified by the board.
Integrated Reporting
In this chapter, King III recommends that the board should:
- Disclose in its integrated report the nature of the company’s dealings with stakeholders and the outcomes of these dealings; and
- Consider disclosing in the integrated report the number and reasons for refusals of requests of information that were lodged with the company in terms of the Promotion of Access to Information Act, 2000.
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NOTE: The comments in this page are to be read within the context of the candor legal notices which can be found at this web site. The Institute of Directors in Southern Africa’s ownership of the copyright in the publications “King Report on Governance for South Africa 2009” and “King Code of Governance for South Africa 2009” is hereby acknowledged.
