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How Effective is Your Board’s Approach to Stakeholder Capitalism?

July 16, 2020

Posted in: WATSON Views

World Economic Forum, Davos Manifesto 2020: “The purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities, and society at large.”

 

For some time now, there has been a greater call on all types of organizations to provide long-term, sustainable solutions to broad social issues. Recognizing the far-reaching impacts of corporate decision-making, organizations are increasingly being called upon to define their broader societal purpose and to integrate this purpose into their core business activities. In defining and living their social purpose, organizations are getting sharper in how they understand and engage with all of their stakeholders. Enter the era of Stakeholder Capitalism.

Stakeholder Capitalism focuses on ensuring organizational decision-making considers and balances the interests, risks, and opportunities of all parties affected by an organization’s operations, beyond its shareholders or members, to maximize long-term, sustainable growth. While the stakeholder capitalism concept has been evolving for some time, the current global pandemic and anti-racism protests have swiftly accelerated this conversation. At its core, stakeholder capitalism, or inclusive capitalism, is about building long-term trust with all affected stakeholders to create sustainable organizational success. Without a clear purpose and approach, it can be challenging to build this trust in a meaningful way.

Boards have an important strategic role to play in shaping and stewarding their organization’s broader social purpose and building trust with a multitude of stakeholders in the process. Recent global events have intensified the board’s role in this area and forced directors to consider what this means for their organizations. While historically boards have tended to approach this area from a disclosure and compliance perspective, boards are now beginning to focus on social purpose as a strategic imperative.

How can a board play a meaningful role in shifting their organization to a more inclusive, stakeholder-driven approach? For many boards, it can be challenging to know where to start. As a board, it’s important to understand where your organization is at, where it needs to get to, and what gaps need to be addressed to bridge the difference.

Start by understanding where your organization is at. What practices and structures do you have in place already? How well do they align with an inclusive, stakeholder-focused approach?

The following survey will help you assess your current state:

Where is your board at? Are your governance structures and practices helping you to achieve an effective and inclusive stakeholder-driven approach? Consider which areas need further development, what your board needs to move forward, and what support you need to get there. Then start thinking about where you want to be as an organization.

Moving beyond your current state can be a challenging process. It takes time, understanding, well-structured discussion, and guidance. We are here to help. We can support your board in identifying gaps, aligning the board on tangible actions, and developing a practical roadmap forward. We’ll help you navigate the complexity and get to greater impact – for your organization and the stakeholders you serve.

 

 

Have a governance question?

Let us know. We are here to help.

letwatsonhelpyou@watsoninc.ca 

 

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