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- Public sector governance requires structurally managing conflicting mandates.
- Effective stakeholder governance in the NFP sector is fundamentally about nurturing ongoing relationships, regardless of the charity’s size or budget.
- In founder-led organisations, governance must balance a founder’s visionary drive with independent oversight.
Genuinely engaging stakeholder perspectives is no longer just about meeting expectations. It’s a key part of creating sustainable long-term value.
In an increasingly complex governance environment, the expectation is that boards will build bridges before they cross them. However, as the AICD’s Stakeholder Governance Guide acknowledges, there is no set formula for getting this right.
Stakeholders hold different, often competing perspectives, and the strategies a board employs to navigate them must adapt to the size, sector and lifecycle stage of their organisation.
The source of stakeholder tension can vary wildly depending on the boardroom you sit in. For public sector directors, the conflict is often structural, while in the not-for-profit space, the tension is often deeply mission-driven. Meanwhile, in founder-led businesses, the challenge is commonly relational.
So how do directors exercise the real judgement required to manage these dynamics? We asked three prominent directors to share their lived experience and practical strategies for navigating the most complex stakeholder relationships.
Public sector
Dr Kerry Schott AO, director of AGL, member of Aware Super’s Direct Asset Committee, and chair of the Australian government’s Competition Review Panel
Public and private sector boards are not as different as many people think. Both have a business purpose. In the private sector, the purpose is often clear – for example, providing best returns to your shareholders. In the public sector, a board often has more than one purpose and these can – and frequently do – conflict.
In a government-owned utility, for example, the purpose will be to provide a commercial return to the owner, but also to deliver services to all at a regulated standard at least cost. Not offering services – or offering them at various different standards – is not a business option, as it usually is in the private sector. There are also directions to the government-owned company to facilitate compatible developments nearby and ensure that local communities are protected from intrusive operations.
To manage the competing objectives, a public sector board typically has two “shareholder ministers” – one from Treasury or Finance, focused on returns and commercial operations, and one more focused on the services being delivered. These two ministers, between them, balance their conflicting purposes and instruct the company accordingly.
It is incumbent on the board and CEO to ensure these ministers are kept abreast of all important issues and there are regular meetings where this occurs. Private sector boards also keep their shareholders informed regularly, although not always as frequently.
Like all boards – public and private – the public sector board sets and recommends strategy and budgets, oversees appropriate conduct, work, health and safety policy and so on, as well as ensuring the company is run efficiently. These roles are fundamentally no different from that in a private sector company.
NFP sector
Adjunct Professor Susan Pascoe AM FAICD, principal of consultancy company Kadisha Enterprises
Size, purpose and resourcing impact stakeholder engagement in the NFP sector. Large charities such as hospitals and universities have budgets and capabilities to design sophisticated communications plans with finely differentiated categories – including which groups and individuals are the focus of the plan, and which senior staff and board members have responsibility for particular relationships. For example, it is likely that the board chair will have responsibility for ministers, and the CEO for department personnel.
Whether a large or small charity, the basis of stakeholder relations is relationships. And relationships need to be nurtured, they are not one-off events. Community-based NFPs are likely to have less-formal engagement at places like the supermarket, church or sporting ground, alongside their formal meetings with their local government authority.
It can be challenging managing competing expectations of stakeholders, such as the beneficiaries of the NFP charitable service, within the strictures of funding bodies. Metrics on complaints (and compliments) are important, as is the organisation’s response. Transparency, multi-modal communication and tracking social media all help. In addition, site visits, board members involving themselves in fundraising activities, and ensuring the voices of consumers are heard around the board table, all contribute to effective stakeholder relationships.
Founder-led businesses and startups
Claire Rogers FAICD, co-founder and non-executive director, Oho, chair, Australian Red Cross
In founder-led businesses, I’ve found the tension between visionary drive and independent governance is real and board composition has a huge role to play. Small, agile boards work best in the early stages – investors also favour them – which means not every founder or adviser can have a seat. Investor-held board seats are common and add complexity, but I’ve found a good relationship helps ensure the investor nominee is chosen – and even rotated – for capability, not just inherited through capital.
Above all, I believe governance needs to be fit for purpose. Boards should draw on both small and large company experience, then apply it in proportion to the company’s stage, comfortable with governance maturing over time rather than insisting on full maturity from day one.
To avoid the risk of founder groupthink, directors need to draw on a range of inputs – an independent chair to keep clear separation between governance and the founder/CEO, holding some board meetings on location, creating opportunities to meet investors or customers directly, diving into the data and watching who is, and isn’t, being brought into the conversation. Done well, I find it one of the most energising parts of the role – and it works best when the founder sees director access as a strength, not a risk.
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