This guide offers practical strategies for Australian directors to successfully integrate stakeholder perspectives into their governance practices. The report is structured around concrete steps for stakeholder governance, including stakeholder identification, understanding stakeholder interests, goal setting, engagement and evaluation.

According to the report, it is the board’s responsibility to ensure effective stakeholder governance. The report makes recommendations concerning how the board should structure its composition to ensure increased stakeholder representation, the benefits of expanding directors’ training on stakeholder engagement, and utilising committees and advisory groups to deliberate on stakeholder engagement issues in-depth.

The report outlines some hallmarks of good stakeholder governance, including prioritisation of stakeholders based on impact, engaging in a wide variety of engagement tactics, and incorporating stakeholder considerations into goal-setting and reporting. The report also stresses that stakeholders must be heard and that boards must be held accountable for demonstrating tangible actions that have mitigated any identified stakeholder issues.

The report offers specific recommendations and considerations for how boards can successfully engage with their stakeholders. It addresses best practices for communication, planning methods based on the stakeholder impact, and specific engagement approaches such as annual reports, social media, employee engagement, and initiating stakeholder dialogue.

The report discusses the debates surrounding shareholder primacy versus stakeholder capitalism and the legal duties of directors in the Australian context. It also notes that ESG issues are increasingly part of boards’ fiduciary duties. The report provides further resources on these topics.

The report suggests that boards must consider environmental, social, and governance issues in their decision-making. The report highlights the significance of issues such as climate-related financial disclosures and modern slavery reporting. Boards must show how the organisation’s strategy, operations, and long-term prospects are impacted by these issues. Additionally, the report recommends proactive engagement with communities and raising awareness of Indigenous issues to ensure cultural understanding.

Overall, this AICD guide highlights that successful and effective stakeholder engagement is valuable for identifying opportunities and reducing risks for organisations. Boards must recognise that prioritising stakeholder perspectives is fundamental to the organisation’s long-term success, stakeholders’ benefits, and sustainable profit. To achieve this, boards must improve their engagement strategies, define their roles clearly and communicate the same to stakeholder groups, while always maintaining legal compliance, and ethical considerations in their decisions.