The Power of Board of Directors: Regaining Trust for Companies and Corporate Governance

As a board member myself, I find myself reflecting on our role as board of directors in navigating these disruptive times. The business landscape is changing rapidly, and it is our responsibility to ensure that the organizations we serve not only adapt but also thrive in this new reality. One key aspect that we, as board members, must prioritize is trust - trust within our companies, trust from our stakeholders, and trust in corporate governance. Drawing on PwC's and Edelman's research, this passionate article delves into the power and significance of boards in regaining trust and shares strategies for fostering strong relationships with multiple stakeholders.

The Imperative of Trust and the Role of the Board

Trust has become a crucial currency in today's interconnected and rapidly evolving world. Stakeholders increasingly hold companies accountable for their actions, and a lack of trust can have dire consequences for an organization's reputation and financial performance. As custodians of corporate governance, boards of directors must recognize the importance of trust and actively work to rebuild it when necessary.

Identifying and Engaging with Key Stakeholders

To regain trust, boards must first identify their key stakeholders and understand their unique concerns and aspirations. This is a critical step towards building strong relationships that can foster trust and enhance long-term stability. Companies and directors should devote time and resources to evaluating stakeholder relationships and undertaking activities to nurture those connections.

PwC's research reveals that 57% of executives believe their boards do not understand the concerns of other key stakeholders, indicating that considerable work is needed in this area. As board members, we must engage with our stakeholders, listen to their concerns, and learn from their perspectives. This open dialogue can provide invaluable insights and help build trust among stakeholders.

Enhancing Trust with Varied Stakeholders

Companies cannot be everything to everyone; they must define their purpose and values and decide where to focus their efforts to align with those principles. Here are some key steps boards can take to prioritize and enhance trust with various stakeholders:

• Strategic Values Matrix: Define values-driven priorities by engaging with stakeholders and assessing how aligning with stakeholder values can enhance long-term economic success.

• Execution Strategy: Integrate values-driven priorities into the long-term strategy by setting long-term goals, interim milestones, and incentives.

• Internal Reporting Structures: Develop internal structures to communicate values, goals, and milestones throughout the organization and accurately track and report progress.

• Strategic Narrative: Craft a concise narrative that brings together these processes and provides the board and executive leadership with the information needed to assess whether trust-building measures contribute to long-term value.

Transparency, Disclosure, and Communication

In a multi-stakeholder environment, expectations for transparency and disclosure are increasing. Stakeholders seek more information about boards and companies, going beyond the required disclosures. The proxy statement, for example, has evolved from a mere compliance document into a powerful trust-building tool that can communicate the board and company's story.

To enhance disclosure and trust, boards should consider providing more comprehensive and nuanced information about their composition, self-assessment processes, response to shareholder votes, and commitment to transparency. These enhanced disclosures can demonstrate to stakeholders that the board is dedicated to trust-building and good governance.

Strategies to Regain Trust and Enhance Corporate Governance

Based on insights from PwC and Edelman research, boards should consider the following strategies:

• Integrate ESG into decision-making: Ensure that ESG considerations are woven into the fabric of the organization by setting clear objectives, performance metrics, and risk management strategies.

• Foster a culture of transparency: Encourage open communication and promote a culture of transparency, both internally and externally.

• Prioritize stakeholder engagement: Actively engage with stakeholders, including investors, employees, customers, and communities, to better understand their concerns and expectations. 4. Promote diversity and inclusion: Strive for diversity across multiple dimensions, such as gender, ethnicity, age, and expertise, to drive innovation and foster a culture of inclusivity.

• Collaborate with governments and NGOs: Actively seek partnerships with governments and NGOs to address pressing societal challenges, such as climate change, income inequality, and skill gaps.

• Invest in employees and local communities: Prioritize fair compensation, training, and investment in local communities to bridge the gap between different income groups and contribute to a more inclusive society.

The board of directors holds immense power and responsibility in guiding companies toward a future of trust and responsible corporate governance. By embracing ESG considerations, fostering transparency, engaging stakeholders, promoting diversity, collaborating with other institutions, advocating for truth, and investing in employees and communities, boards can help rebuild trust in companies and drive meaningful change for the betterment of society. In these disruptive times, it is our duty as board members to rise to the challenge and steer our organizations toward a more sustainable, equitable, and transparent future.