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Stakeholder Panels
(extract from the unpublished manuscript: The Business Climate, by Daniel Roberts, 2007 - 2009)
Over the past decade the concept of the Stakeholder Panel has gained in popularity. The concept is to bring together a wide range of individuals and experts, with the company, to explore issues of governance, environment, sustainability, and other issues of concern to the stakeholder community. The use of stakeholders can be very effective in assisting a company in identifying issues of importance to the wider community (and the more narrow interests of specific stakeholder groups), and identifying and reporting on the company's responses to such stakeholders interests. The outputs of the panel can include specific action plans, reporting requirements, and Key Performance Indicators (KPIs) that will be included in reporting and that may be included in management objectives.
While this discussion Stakeholder Panels (also known as Stakeholder Councils) is included in the section on assurance, Stakeholder Panels should not be used for or considered able to provide assurance. A Stakeholder Panel, by its very definition, is not an independent entity, nor is it composed of independent individuals. Independence is a cornerstone of the performance of audit or assurance activity, and any audit or assurance report produced by individuals or a firm or group that is not independent would be sorely lacking in credibility. However, Stakeholder Panels can provide effective guidance to the company and to the assurance provider.
The use of Stakeholder Panels has gained favor over the past decade along with the increasing visibility of behavior across the full span of a company's supply chain. Historically a company could source raw materials, labor, components, or even complete produces from a multitude of geographies and political entities with little concern that the business or environmental practices in the source locations would come under scrutiny. Increased openness of travel and communication, and the ability to rapidly bring information about business and environmental practices into greater visibility has driven companies to pay greater holistic attention to their suppliers and supply chain.
Stakeholder Panels (also Stakeholder Councils) provide a forum for companies to ensure that they are engaging representation from across the supply chain and across the consumer chain. The effective use of such Panels can best identify, and help formulate effective company policy responses to, potential market share impacting events or situations.
What is a Stakeholder Panel:
At heart, a Stakeholder Panel is just what the name implies, a panel made up of stakeholders. Once past that simplistic definition, the important questions surround what is a stakeholder, what is the panel and the mandate of the panel, and how such a panel is formed, empowered, managed, and the authority that the results of the panel have in influencing company behavior.
An effective Stakeholder Panel will be constructed with as wide a range of stakeholders as possible, including participation from shareholders, customers, suppliers, unions and NGOs, financiers, management and regulators. This is an incomplete list of course, but serves to point out that a stakeholder could be almost anyone or any entity with an interest in the performance, products and services of the company.
Secondly, the individuals actively involved in the Panel should poses such complementary skills and detailed knowledge required to effectively contribute to the deliberations of the Panel or its subcommittees or working groups.
What makes a successful Stakeholder Panel?
As with so many business activities, success will be determined almost entirely by a clear definition of the mandate and expected outcomes, and executive agreement to provide support for the activity. Where executive leadership has empowered such a Stakeholder Panel, and the panel has been involved in and agreed the rules of engagements and projected outcomes, there can be greater confidence that the panel will be "successful". However, if the panel is established either without executive support, or is created specifically as a prop to provide executive leadership with a foil to neutralize worrisome stakeholders (such as unions and social issue NGOs), there is a strong probability that the results will be satisfactory for executive leadership only.
Authority:
The success of a Stakeholder Panel will depend very much on the authority granted the panel in its mandate, and an understanding of that authority by all members of the panel. Bearing in mind that such a panel is focused primarily on social and environmental policy and not on operational efficiency, it is important that the company assert and retain the right to accept and implement recommendations or to determine that such recommendations are inconsistent with the company's current business prerogatives. Coupled with this is agreement by all parties to respect the ultimate decisions of the company, and to agree not to work against the company should such recommendation not be accepted or implemented.
The Stakeholder Panel is not the operational management of the company, nor is it the Strategic Planning function, nor is it the Board of Directors. It is an advisory panel enacted and empowered by the company to provide advice and guidance.
And while Stakeholder Panels are not a formal part of the operational or governance structure, they can be used to negotiate appropriate standards, key performance indicators (KPIs), and processes that will be used in the provision of assurance over company activities, in relation to the agreed mandate of the Stakeholder Panel. In this way a panel can play an important role in communicating standards of performance throughout a company and its supply chains, and can be used to leverage specialist resources and skill sets that are not common to companies. For example, panels can include representation from key partner or potential partner NGOs, who can in part provide local access and guidance in relation to the company's agreed Stakeholder Panel (or internally developed) social and sustainability KPIs.
Scope:
Closely related to the authority of a panel is the defined scope of attention of the panel. Successful panels will have a clearly and carefully defined scope, and proceedings of the panel will stay within scope. It is the responsibility of the internal company panel manager to ensure that "scope creep" is avoided. A panel with a scope of focusing on health and safety should be encouraged to remain focused on that area.
Composition:
As discussed earlier, it is common to reach out to a broad range of participants in the supply chain and community to identify appropriate potential participants in the Stakeholder Panel. Participants should first be subject matter experts in an area of importance to the company's wider environment, be that environmental, social, regulatory or commercial / business knowledge.
The participants should also represent entities or have a clear mandate from a well defined community or communities. From an organizational perspective, it is usually clear if an individual represents the organization. This is not automatically the case when seeking community representation. In New Zealand for example, it is critical that when seeking Moari participation, that the engaged Kaumatua (elder or elders) actually represent the local Iwi (tribe) Hapu (sub- tribe) and Whanua (clan, pronouced "faa- now"). Tribal and even local rivalries can result in a situation in which the Kaumatua is considered able to represent the views and objectives of one particular group, yet the result may be that recommendations accepted by the company are not accepted by the community as a whole. Therefore local cultural considerations need to be carefully considered when selecting participants.
Representation from investor or rating agencies should be considered, with particular attention to those institutional investors with CSR credentials. Be mindful of potential insider trading implications of the appointment of an individual representing a investment fund, and in most cases where such a potential problem could arise, the individual will politely decline your offer. CSR / SRI specialists, consultants, or representatives of a CSR / SRI based investment fund or funds manager can bring significant subject matter expertise, and access to a wide range of materials and individuals who could be of assistance when it comes time to implement the operational and reporting requirements of the panel.
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