The Institute of Chartered Secretaries and Administrators (ICSA) and the Investment Association (IA) have published guidance entitled “The Stakeholder Voice in Board Decision Making; Strengthening the business, promoting long-term success” (available to ICSA members). This guidance is aimed at the boards of all companies, whether listed or privately owned and regardless of sector or size.

The guidance acknowledges that whilst companies may have certain stakeholders in common (such as employees, customers, suppliers, shareholders and lenders) their stakeholders will vary according to, amongst other things, the size, industry and location of the specific business. For that reason, the guidance does not seek to set out a comprehensive range of approaches but rather concentrates on 10 core principles that should guide boards’ strategic decision making.

The core principles are set out below verbatim:

• “Boards should identify, and keep under regular review, who they consider their key stakeholders to be and why.

• Boards should determine which stakeholders they need to engage with directly, as opposed to relying solely on information from management.

• When evaluating their composition and effectiveness, boards should identify what stakeholder expertise is needed in the boardroom and decide whether they have, or would benefit from, directors with directly relevant experience or understanding.

• When recruiting any director, the nomination committee should take the stakeholder perspective into account when deciding on the recruitment process and the selection criteria.

• The chairman – supported by the company secretary – should keep under review the adequacy of the training received by all directors on stakeholder-related matters, and the induction received by new directors, particularly those without previous board experience.

• The chairman – supported by the board, management and the company secretary – should determine how best to ensure that the board’s decision-making processes give sufficient consideration to key stakeholders.

• Boards should ensure that appropriate engagement with key stakeholders is taking place and that this is kept under regular review.

• In designing engagement mechanisms, companies should consider what would be most effective and convenient for the stakeholders, not just the company.

• The board should report to its shareholders on how it has taken the impact on key stakeholders into account when making decisions.

• The board should provide feedback to those stakeholders with whom it has engaged, which should be tailored to the different stakeholder groups.”

The Government has recently announced a raft of corporate governance reforms and the Financial Reporting Council will be consulting on the development of a new UK Corporate Governance Code with an intended implementation date for company reporting years commencing after June 2018. In light of these developments, ICSA and the IA will update this guidance, if necessary, but in any event will review the guidance in the second half of 2019 to measure it against companies’ experience of applying the guidance.