All stakeholders have a role in the success of a business, but employees play a unique role in the performance of a company as the stakeholder group with the most personal experience of its operation.
A strong ESG (environmental, social, and governance) profile makes a business attractive to all stakeholders such as investors, lenders, employees, and customers. In order to build this profile, company boards must ensure they’re progressing in all three elements in the eyes of key groups – for employees, this translates to trust and confidence in their board.
However, new research from LawDeb, the independent professional services firm, reveals that most employees either don’t understand, or don’t trust, what their board does across a range of core ESG considerations.
Good governance?
Good governance requires trust and understanding, but new research from LawDeb reveals that only 51% of UK workers actually understand the role of their company’s board, a number which falls to 45% of those aged between 16 and 24. This coincides with a general lack of trust, with only 54% believing that their company means what they say.
The data paints a more positive picture for decision making however, with three-in-five (58%) employees trusting their companies to keep their promises, and 54% agreeing that the decisions the board makes are the best for all stakeholders. The research also shows that 54% of employees are confident that they would know how to raise views on how the company is run; a figure that rises to 60% among 24–30-year-olds.
Social progress?
Social considerations are also important among employees. The majority of workers are in favour of diverse boards, with two-thirds stating that the diversity of their business’ board should reflect the diversity of the employees. 57% also believe that a diverse board creates a better working environment. Diversity is valued more by women compared to men, with 71% of women agreeing that a board should be representative of its employees vs 62% of men, and 60% of women vs 55% of men agreeing that diverse boards create better working environments.
Environmental advances?
Factors such as new Sustainability Disclosure Requirements (SDRs), the upcoming COP29 conference, and a continued focus on ESG reporting are all bringing environmental considerations firmly back onto the board agenda. With this in mind, there’s room for improvement in the eyes of employees; only 54% of employees currently think their workplace does a good job protecting the environment.
Patrick Davis, Director of Corporate Secretarial Services (CSS) at LawDeb, comments: “Boards understandably focus on tangible strategic objectives which should include engagement with stakeholder groups – mechanisms such as the designated non-executive director for employee engagement within the listed environment, allied with other feedback loops, provide an effective way to develop an ongoing dialogue with this stakeholder group. The board’s response to this input can improve engagement and demonstrate the board’s role to employees which can be transformative.
“Though all stakeholder groups need to of course be considered, it’s hugely important that business leaders find ways to drive engagement with employees across the business and maintain an open two-way dialogue with colleagues to ensure opinions and needs are being heard. This will generate trust, make employees feel more valued and motivated, and could lead to better productivity – ultimately improving the bottom line. Doing so will require thorough governance, robust corporate health checks, appropriate director training and additional elements such as records maintenance. It’s critical that businesses are equipped with all the required tools to ensure boards and their employees have a mutually beneficial relationship.”
