The requirement will have a broad impact and applies to all but the smallest UK companies. The only companies to be excluded will meet two of the following criteria.
- Turnover less than £36 million
- Balance Sheet total less than £18 million
- Fewer than 250 employees
What Will Section 172(1) Reporting Look Like?
This is a question that’s currently exercising Audit Committee Chairs.
The stakeholder universe in Section 172 is defined broadly and presciently includes climate change.
How will Board Members demonstrate that they have indeed had regard to the various constituents when performing their duty?
Of course, the answer could be boiler plate, but this would be a wasted opportunity at a time when anti-business sentiment is running high internationally. Indeed, in the UK a new regulator is taking shape that will have authority to sanction Board Directors, and not just those who happen to be chartered accountants.
While significant in its own right Section 172(1) Reporting is also symptomatic of a much broader shift that is underway in the public, political and regulatory landscape, which Boards ignore at their peril. The increasing, complex and frequently onerous demands that are being made of public companies are unlikely to recede and the rise of ESG among leading investors creates an imperative for companies and their Boards to have a clear narrative and purpose.
Practically, Fidelio sees:
- Board skill matrices extending to include the ability to think through stakeholder engagement in a structured and above all strategic manner
- Board Evaluation exploring and reviewing the Board’s ability to oversee effective stakeholder and shareholder engagement, as well as the Board’s ability to adjudicate between competing stakeholder and shareholder interests.
- Board Development, including “A Seat at the Table” preparing Board Directors to be alert to stakeholder concerns and open to effective engagement
- Executive effectiveness with Boards ensuring a high degree of competence at the executive level to engage effectively with
- shareholders (IR Director, Company Secretary)
- a broad range of stakeholders often critical to the success of the company (Corporate Affairs, HR, Government and Regulatory Affairs, Sustainability Directors)
For further information on how Fidelio Partners can support your Board with regard to shareholder and stakeholder engagement through Search, Evaluation or Development, contact Gillian Karran-Cumberlege on firstname.lastname@example.org.