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The Board’s Role in Creating Social Value: Q&A with Laura Sanderson

 



Companies must look beyond financial purpose to understand how they can make a positive contribution to society. We talk to Russell Reynolds Associates' Consultant Laura Sanderson on why boards have such an important role to play when it comes to embedding social value thinking into their organizations.

 

Q: How prepared are boards when it comes to incorporating social value thinking into strategic decision-making?

That really depends on where in the world we’re talking about. It does vary a little bit from region to region. But it’s fair to say that this is becoming a bigger and bigger issue for boards globally, as a larger and larger share of global assets are invested against social value criteria. So, boards need to show that they’re doing this. And fast.

Here in the UK, we’ve had a recent change to the law, which requires boards of major companies to report on how they’re taking the considerations of employees, customers, suppliers and local communities, as well as shareholders, into account. And that’s a pretty good entryway into social value thinking, so boards are beginning to work on this very actively.  

But for most boards, really letting that inform decision-making requires a different set of inputs for the board to be considering, and a slightly different agenda for the board as a whole. And it’s probably fair to say that is still a work in progress for most companies.

Q: What questions do boards need to ask themselves to bring social value into the boardroom?

The first and most important question that boards need an answer to is: Does this company have a purpose that serves the common good, as well as creating long-term sustainable value?

Underneath that, there are a whole set of questions. For example, how good is this company at treating people with respect? How good are we at understanding what our workforce thinks and what matters to them? The answers may not be what we expect. I was talking to a non-executive director recently who is the designated workforce representative for his company. He recently asked employees what they wanted in a range of different areas. They said that in the event of another economic downturn, it would be a better idea to introduce a four-day workweek than to go through mass redundancies. That is a crucial piece of information that he could take straight back into the boardroom. It immediately impacted decision making. So, it’s really important that the board understands what the workforce really cares about.

It's also important for boards to ask: How good are we at treating our suppliers and our customers well? What data are we looking at regularly to give a sanity test on that? What's the environmental impact of our routine activities? We also need to be asking about what the culture of the company is—that's very important. But, more personally, directors also need to be thinking: What is the character of the current group of directors? And what is the character and what are the values of future directors we may want to appoint? These questions can become very personal at the end of the day.

 

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