#boardresponsibilities

For any company, there are two categories of stakeholders: internal and external. Internal stakeholders comprise employees, owners and shareholders, Board, investors and the like. They usually have a direct interest in the company, and this is usually through employment, ownership or investment. Some of them could have an influence over the decisions of the company too. External stakeholders comprise customers, suppliers, vendors, regulators, society, media and the like. They may have a stake in the company’s functioning, but do not play a direct role in the decision-making of the company. For any company to run smoothly, it is vital that all the stakeholders trust the company, its Board, and its management.

It is sometimes possible that various stakeholders could have conflicting interests, and it is for the company, its Board and its management to play the role akin to one of a referee to balance these conflicting interests. However, all the stakeholders have a common interest, which is the growth of the company. If all stakeholders place their personal interest below that of the company, there would ordinarily be no conflict.

To manage the trust of stakeholders, the following could help:

Identifying the stakeholders of a company – Unless a company knows its stakeholders, it cannot take necessary steps to build and manage their trust.

Identifying the needs of the stakeholders – While there is no hierarchy of stakeholders, there could be a difference in needs of different stakeholders. For example, the requirements of employees, could be different from those of customers. A company should consciously understand the composition of different stakeholders, and their needs.

Planning communication with different stakeholders – The mode of communication, the objective, the periodicity, and who would communicate with different stakeholders would be different. A company has to consciously plan these aspects.

Having engagement programmes – The company should proactively engage with different stakeholders. It could be through smaller gatherings, townhalls or general meetings. Each one of them serves a different purpose. Further, the quality of conversation with each of the stakeholders has to be carefully thought through.

Keeping promises and expectations realistic – The representative of the company interacting with different stakeholders should not be unrealistic in the promises made, or the expectations set. Under-promise, but overdeliver is a good motto to have.

Keeping the Board informed – The Board is responsible for stakeholder engagement. It should be kept informed about the interactions with various stakeholders, any concerns identified by them, and promises made to them. The Board should also ensure that if there are concerns flagged by any stakeholder, they are addressed at the earliest. The Stakeholders Relationship Committee should play an important role in this.

Reporting – Integrated reporting, and now Business Responsibility and Sustainability Reporting (BRSR), focus on different stakeholders of a business, and the efforts of a company in proactively reaching out to different stakeholders.

Creating an effective redressal mechanism – Each company should have a well-functioning mechanism by which different stakeholders can raise their concerns, if any, on a continuing basis.

Trust is built and nurtured when a company demonstrates the right intent towards each stakeholder. Creating and managing trust of stakeholders is not a one-day task, but a gradual process, which the companies need to implement proactively.