How to build trust with stakeholders

How to build trust with stakeholders: a corporate governance training guide to ensuring your relationships with key cohorts remain positive. 

Building stakeholder trust is crucial for any company’s long-term success and sustainability. 

From the start, it’s important to remember that stakeholders and shareholders are not the same thing. Shareholders are one of many groups of stakeholders that your company needs to cater for, particularly in this age of sustainable and trust-oriented business landscape.  

Here’s how to get started:

Corporate stakeholders are individuals or groups that have an interest in or stake in a company’s performance and/or actions. 

It’s a broad term that includes shareholders, employees, customers, suppliers, creditors, regulators, and the communities where the company might operate offices, factories, or project work. 

Each group of stakeholders has its own set of expectations and interests, which can sometimes be conflicting. Managing that conflict and keeping different groups happy is a core measure of corporate success.

The board of directors might not directly interact with all groups of stakeholders equally. Nevertheless, it has a pivotal role in stakeholder engagement and trust-building. 

As the driving force of a company’s governance, the board often has the final say in the company’s policy toward each group of stakeholders, so it has numerous responsibilities. 

They include ensuring transparent communication, upholding ethical standards, and balancing the diverse interests of different groups. 

Through its actions, the board sets the tone for corporate governance and is accountable for the company’s strategic direction, ensuring that stakeholder interests are considered in decision-making processes.

It’s an important question – particularly for directors familiar with the Anglo-American governance model, where shareholder returns are the highest priority. 

Ultimately, though, focusing solely on shareholder value can undermine long-term success. 

Satisfying all stakeholders leads to a more sustainable business model. For example, motivated employees are more productive, satisfied customers are more loyal, and supportive communities can enhance a company’s operating environment. Additionally, strong stakeholder relationships can mitigate risks to reputation, productivity, custom, or the chance of legal action against your firm. 

In other words, it pays to care about everyone who has an interest in your business.

Update stakeholders regularly on company performance, strategy, and changes. Use clear, honest communication to build credibility and manage expectations. Don’t lie or exaggerate progress; you could easily be called out for this. 

Examples of good communication include annual reports, shareholder meetings, press releases, community consultations and customer feedback channels.

Ensure that the company operates with integrity and adheres to the ethical standards you agreed to beforehand. This builds trust and reduces the risk of legal issues.

Examples of how this works in practice include a robust compliance programme and staged approaches to handling big decisions so that ethics can be considered.

Actively involve stakeholders in your company’s processes to seek input or decision-making processes and seek their input on significant issues. This shows that their opinions are valued and considered.

Examples include creating advisory panels or conducting surveys on anything from products to local impacts.

Engaging in CSR initiatives that align with stakeholders’ values and expectations demonstrates a commitment to societal welfare beyond profit.

Examples include sustainability programs, community development projects, and fair labour practices.

In a statement, Nasdaq said it wants to “work with our companies to implement this new listing rule and set a new standard for corporate governance.”

“These rules will allow investors to gain a better understanding of Nasdaq-listed companies’ approach to board diversity,” said SEC chair Gary Gensler in a statement.

Deliver on promises and be accountable for outcomes. Establishing a track record of meeting or exceeding expectations is fundamental to building trust. Also, ensure that the reporting you use to communicate this progress is accessible to whoever needs to read it.

Building trust with stakeholders is essential for a company’s long-term success. The board plays a critical role in this process through transparent communication, ethical practices, active engagement, CSR initiatives, and accountability. 

Companies can create a sustainable and resilient business model that benefits everyone involved by focusing on the needs and expectations of all stakeholders, not just shareholders.