In the last article we considered the increasing need to take account of the interests of stakeholders.
In many cases this requires a relationship, and relationships require communication.
The first stage is to establish processes to ensure that the organisation and the board are able to monitor relations with shareholders and other interested parties.
The second is to ensure that communications with shareholders and other interested parties are effective.
Companies should have some form of formal or informal market and competitive intelligence system by which they collect, collate and interpet information. Directors should ensure that this includes information about their key stakeholders.
The purpose of collecting information about stakeholders is to improve decision-making and to evaluate problems and opportunities to allow early action. It should also be capable of evaluating the cost and benefit of managing or mismanaging such relations.
Since stakeholders are mainly closely involved with the organisation some information can be collected through good personal relations, though it is also desirable to obtain information from independent third parties, including by monitoring the media.
As with all information collection, the board needs to monitor both its effectiveness and its cost-effectiveness.
Communication from the organisation to shareholders and stakehloders can be more formal, with particular emphasis on the content of the annual report and statements to the press and stock market. In some cases this needs to be carefully managed to ensure that some shareholders are not given privileged information; directors should make sure they are familiar with Stock Exchange rules on such matters.
It is in the interest of an organisation to maintain a pro-active and positive public relations strategy. In addition to the specific needs of shareholders and stakeholders, it should promote its vision, mission, values and policies, together with good (and bad) news about new investments, best practice, significant orders, corporate social responsibility, etc.
The chairman and chief executive will play a significant role here, but it is a responsibility of all directors to act as ambassadors for their organisation.
Although much of this information relates to organisation and management matters and the detail is of no direct interest to the board, the board should ensure that communications, and thus relations with stakeholders, are adequate.
Does the board monitor relations with shareholders and other interested parties and ensure that communications are effective?
Richard Winfield is the independent authority on director development. He helps directors and boards become more effective by clarifying goals, improving communication and applying good corporate governance.
This article is part of a free e-course for directors at http://www.brefigroup.co.uk/directors/director_development_and_training_e-course.html