Stakeholder relationship promotes a practical, efficient, effective, and ethical way to manage organizations in a highly complex and turbulent environment. Stakeholder relationships play an important role in corporate governance and can serve the company to balance various groups’ benefits. Depending on the scope of your organization, stakeholder relationships can be developed at all levels: nationally, regionally, and locally. These relationships build networks that develop credible, united voices about issues, products, and services that are important to the organization.
The Corporate Governance framework should recognise the rights of stakeholders and encourage active cooperation between companies and stakeholders in creating wealth, and sustainability of financially sound enterprises.
Features of stakeholder relationship in good corporate governance include: –
1. The Board shall have a stakeholder-inclusive approach in its practice of corporate governance and shall identify its various stakeholders.
The Board shall identify all its stakeholders, and map out areas of interaction to ensure an all-inclusive approach to corporate governance recognising that a company has many stakeholders that can affect or be affected by it, in the achievement of its strategy and long-term sustained growth.
2. The Board shall develop strategies and suitable policies to manage relations with different stakeholder groups.
Having identified its key stakeholders, the Company shall develop a strategy and suitable policies on how it shall manage its relations with each of its stakeholder groups.
3. Constructive engagement with stakeholders shall be deliberate and planned.
The Board shall identify mechanisms and processes that can support constructive engagement with stakeholders so as to promote enhanced levels of corporate governance.
4. The Board shall take into account the interests of all key stakeholder groups before making its decisions.
The company should consider all stakeholders’ interests during making decisions, which could balance the demands of individual groups to reduce economic losses. Stakeholders participation in the decision-making process could help the company reduce management costs and risks.
The Board should strive, while acting in the best interests of the Company, to achieve an appropriate balance between the interests of its various stakeholders, in order to achieve the long-term objectives of the Company. The Board, while accountable to the company, should take into account the legitimate expectations of its stakeholders in its decision-making. Board decisions on balancing the interests of stakeholders should be guided by the aim of ultimately advancing the best interest of the Company.
5. The Board should recognize, test, where necessary, and respect the governance practices of stakeholders in an effort to improve the company’s own governance practices.
If a company and its stakeholders in general adhere to the same standards of corporate governance, mutual respect will be a natural consequence. It is therefore important for the company to monitor the quality of corporate governance practiced by its strategic stakeholders.
Conclusion
An inclusive corporate governance approach enables the company and its stakeholders to adopt a collaborative approach that promotes reciprocal trust and respect between the company and its key stakeholders.
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