Directors tired of being over an insurance barrel now have some new tactics to tackle risk management.
The position that an organisation takes on an important or contentious social issue can have substantial implications.
Boards and organisations that do well in navigating social issues, irrespective of whether they take a position, often have a decision-making framework or process for considering how to approach them.
Organisations that don’t have a process to make these decisions may struggle as, by their nature, national debates on social issues are complex.
There is a risk that organisational positions can be driven by the views of influential individuals — such as CEOs or directors — without appropriate governance oversight.
Given their complexity and potential reputational and stakeholder impacts, it is important that organisational positions receive sufficient scrutiny and attention.
Importantly, this article does not address the detail of the Voice to Parliament, nor advocate for organisations to take a position (whether supportive or in opposition) on the referendum proposal.
It focuses on how boards of companies and not-for-profits are considering the topic and shares examples and insights from experienced directors.
We also suggest questions for directors to ask when considering an issue like the Voice.
To support members, the AICD interviewed some of Australia’s leading directors to gain insights on board processes that can support effective boardroom discussion and governance oversight of these issues.
A consistent theme was that boards should consider whether taking a position is necessary or desirable, as a first step, before then considering what that position should be.
Every organisation is unique, with its own purpose and values, business operations and stakeholders.
Applying a framework can help the board assess each issue on its merit, prompt deliberation and assist the board in determining what to do. However, it is not a case of applying a “cookie-cutter” framework.
By their nature, each issue requires consideration on its merits and the unique circumstances of each organisation. It is not a particular framework that is critical, but the conversation and deliberation that it facilitates.
Addressing the “why”
The first question directors we spoke with asked regarding social issues was “why”. Why should we have a position on the Voice, as opposed to the many other issues we do not?
Directors noted that organisations should not try to provide a running commentary on important social issues, but think carefully about those issues on which they should engage.
As NAB chair Philip Chronican GAICD noted, “There are many issues our organisation does not engage on or take a perspective on, because they aren’t relevant to our business or the stakeholders that we serve.”
For most boards, the starting points are purpose, mission and strategic alignment.
Experience and capacity of the board
Just as with other issues, collective experience around the board makes for better decisions.
Many of the directors we spoke with sit on boards with members who have experience with First Nations issues and engagement, which enhanced the board’s discussions.
Directors also highlighted the cross-pollination between organisations as being critical — other director or executive experience across sectors can enrich the board’s discussion.
Equally, as with any complex issue before boards, directors will seek to educate themselves on the issue, rather than just relying on a particular board member or management advice to carry the discussion.
Engagement with stakeholders
Sound stakeholder governance encourages organisations to identify, engage with and understand stakeholder perspectives on critical issues — and then reflect on how these perspectives should be considered in decision-making.
Directors emphasised the importance of stakeholder engagement on issues such as the Voice, highlighting that stakeholder sentiment may evolve over time and that such engagement must be authentic — and more than just a tick-the- box exercise.
Although management lead day-to-day stakeholder engagement in most organisations and circumstances, directors we spoke with emphasised that on social issues, the board should not just rely on management briefings.
Many directors we spoke with had engaged directly with key stakeholders on the Voice, such as First Nations employees, legal experts and traditional owners.
Employees are important stakeholders
Employees were often cited as an important stakeholder group when it came to companies’ decision-making on social issues. An organisation’s position on a social issue may affect whether employees want to be associated with the company and are proud to work there.
Lendlease chair Michael Ullmer AO FAICD commented, “In a war for talent, it is very important to understand what sort of value proposition you are putting forward for your people. Employees are increasingly discerning about their values and the organisation’s values.”
Equally, organisations will be mindful that employees hold different views. Directors were conscious of differentiating organisational positions from an organisation speaking for all employees and promoting respect for individual views.
Regarding the Voice, consulting with First Nations’ employees is critical — making sure they are included in the conversation. Directors noted that creating culturally safe environments for this engagement is an important focus. In consulting with employees, organisations will also seek to provide for all employee views to be shared respectfully.
Avoiding virtue signalling
When an organisation takes a position on a social issue, the position should be reflected in tangible actions that align with a clearly articulated purpose. Being able to articulate a rationale for taking a position is critical for an organisation’s position to be authentic. In a listed context, this is something investors will look closely at, particularly through an environmental, social and governance (ESG) lens.
For the directors we spoke with, decisions regarding the Voice and the Uluru Statement from the Heart were often grounded in their history of long-term engagement and commitment to reconciliation, typically enshrined in their organisation’s Reconciliation Action Plan.
If a decision is made to take a position on a social issue, the board and management must agree on proper implementation. Critically, it’s important that boards engage and communicate with all stakeholders once a decision is made.
Cluey Learning non-executive director Louise McElvogue FAICD commented, “Once you form a view on a social issue, there will be a number of people who do not agree with you. How you treat them is as important as how you treat the people who do agree with your view.”
Questions to guide boardroom discussions
To help guide directors considering significant social issues like the Voice, the following questions may assist in boardroom discussions:
Unique circumstances of the organisation
1. Should our organisation take a position on the issue?
2. Is the issue relevant to our values or purpose (or charitable purpose)?
3. Is the issue relevant to our operations or consistent with our strategic plan?
Apply a risk lens
4. What potential impact will taking a position — or not taking a position — have on our reputation, our business operations and/or our people?
5. How does the decision fit within our risk appetite statement?
6. What risk mitigation measures can we put in place?
Stakeholders, existing positions and peers
7. What are the views of our shareholders, employees, members or other stakeholders on this issue — and their expectations of us as an organisation?
8. How does the issue intersect with existing positions, for example, our Reconciliation Action Plan?
9. What are our peer organisations doing?
Authenticity and implementation
10. What actions will flow from taking a position for our organisation’s operations and priorities?
11. How will our organisation respond if or when the issue is publicly debated or resolved?
12. What is our implementation and communication plan?
Find out more and download the AICD resource document here.
This article first appeared under the headline 'Social Issues Scaffold’ in the August 2023 issue of Company Director magazine.
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