Companies are increasingly pushed by their stakeholders to be more transparent on their governance structures and policies, and to take specific stances on sensitive topics, as accountability on actions becomes the number one priority across the Western world. These expectations are evidenced by current social movements rolling through the press and social media in waves.
Digital facilitates dialogue, keeping companies accountable
As companies become increasingly digital, and open themselves up to engagement via social media, the power their stakeholders have to not only interact with them, but also influence them, has risen dramatically.
What companies say online, and how people react to those statements, has the power to influence corporate decision making, drawing attention to areas of stakeholder discontent with the company. Movements like the #metoo social movement that exploded across social media and traditional media showcases the power that individuals have to hold those in power accountable for their actions and spur change. How a business conducts itself ethically, and the role of its code of conduct, becomes increasingly important here.
Similarly, the collapse of UK-construction giant Carillion in January 2018, and the public outcry on the executives' pay packets despite the company going into liquidation, have put corporate governance (and the lack thereof, in some companies) squarely in the spotlight.
Growing importance of transparency on leadership and governance procedures
Almost all the stakeholders we surveyed (92%) would like companies to communicate more transparently on governance procedures such as risk management and their leadership. Yet as it stands, only 37% of companies are actually communicating their risk management procedures, and only slightly over half (54%) provide complete information on their board of directors (including composition, CVs and so forth). The figures on remuneration are even lower, with only 9% of companies transparently presenting this on their corporate website, despite 87% of stakeholders wanting to see this information.
What is promising, however, is that diversity in the boardroom seems to be on the rise. With gender equality in leadership positions another hot topic. It is encouraging to see that the percentage of companies that communicate transparently on the diversity of their board of directors has spiked 23% from 2016 (from 32% to 55%). As the leadership of companies becomes more diverse, creating policies and structures that are fair becomes more important. In fact, the average percentage of companies that communicate their corporate policy on diversity and the extension of equal opportunities, and who present the results of that approach in concrete numbers, has jumped from 45% in 2016 to 50% in 2017.
European companies take note: Transparency on sustainability is becoming the norm
European companies saw a resounding improvement in their performance in the Sustainability sections of their website since last year, indicating that companies increasingly value a positive image of corporate citizenship, and are placing more attention on meeting their stakeholders needs in this area by providing relevant topical information on these subjects.
The companies that publish their strategies for sustainability has jumped from 72% to 85%, and the percentage of top European companies that are actually backing up their claims with data (such as presenting the gender balance within the business, training opportunities and so forth ) has risen from 34% to 38%.
Too often companies fall into the trap of stating they have a sustainability strategy, but fail to publish the report with the figures in support of the sustainability strategy, as evidenced by the disparity in the percentage of companies that publish their sustainability strategies and those that also provide the concrete data to back them up. It is critical for companies to be making strides in this area, as stakeholders (89% in our survey) are now more interested in what companies are doing to limit discrimination and promote inclusion amongst their human capital. Although not all European companies are obliged by the EU directive to report on non-financial information, the new regulation is symptomatic of a wider trend: transparency on sustainability is becoming the norm and European companies need to take note of this.
Orkla top performer in corporate governance
Norwegian supplier of branded consumer goods Orkla is among the top performers in the corporate governance section of the research for the breadth and quality of information that it provides regarding its board of directors, remuneration, top line managers, auditors, and insider trading.
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