8.1 The board understands who the organisation’s stakeholders are, their needs
and their expectations
8.2 The board oversees a framework for the meaningful engagement of
8.3 Stakeholders are considered in relevant board decision-making
8.4 There is a process for gathering and responding to complaints and feedback
8.5 The board oversees a framework for how the organisation works with and
protects vulnerable people
To govern effectively, boards must have an awareness of
the stakeholder environment in which they operate and
understand the needs and interests of these stakeholders.
In certain circumstances, boards may also have obligations
under the law about how they work with stakeholders. At the
heart of stakeholder engagement is the acknowledgement that
organisations are impacted by, and have an impact on those
with whom they interact.
Identifying your stakeholders
All organisations have stakeholders, though who these are will
vary based on factors such as the activities an organisation
undertakes and its relationships. Boards should develop an
understanding of who their stakeholders are, what their
relationship to the organisation is, and what responsibilities
the organisation has to them, if any. Often, the most important
stakeholders for an organisation will be the people that the
organisation exists to benefit (its beneficiaries).
Example of stakeholders include:
- Clients and their families;
- General public;
In certain circumstances, directors may have legal obligations
to their stakeholders either directly or through the
organisation. For example, an organisation has a legal duty to
take reasonable care to avoid exposing its workers, including
any volunteers, to reasonably foreseeable risks of injury.
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Do directors owe a duty to their stakeholders?
Directors’ duties are generally owed to the organisation as a
whole. That is, directors must act honestly, in good faith and
to the best of their ability in the interests of the organisation.
In practice, this means that a director owes their duties to the
members of the organisation, and not to its other stakeholders.
However, an organisation may be subject to other statutory
requirements (such as work health and safety legislation) that
give rise to duties that directors owe to other stakeholders.
However, directors should consider the views and interests
of stakeholders because they can lead to better and more
balanced decisions in pursuing the organisation’s purpose.
Duties of directors are discussed in greater detail in Principle2: Roles and responsibilities.
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Engaging with stakeholders
Effective stakeholder engagement involves building
relationships based on mutual trust, respect and
understanding. Engagement is not an end in itself, but a
means by which to build and develop relationships which help
organisations to pursue their purpose.
Stakeholder engagement is beneficial both to organisations
and to stakeholders. It provides valuable information
to the organisation (such as about how it is perceived,
its stakeholders’ needs and its broader operational
environment), builds goodwill and helps to identify potential
issues for resolution.
Stakeholders benefit from these relationships too through
helping organisations to better understand their needs and
expectations. This engagement also helps stakeholders to
develop a more informed understanding of the
organisation and how to work with it, and to manage their
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The board’s role in stakeholder engagement
An organisation’s relationships with its stakeholders can have
a significant impact on its ability to achieve its goals. As such,
boards should oversee the process of stakeholder engagement
and be satisfied that its stakeholders are identified and
understood. Stakeholder engagement is a critical component
of good governance.
“Corporate Governance is concerned
with holding the balance between
economic and social goals and
between individual and communal
The corporate governance
framework is there to encourage
the efficient use of resources and
equally to require accountability for
the stewardship of those resources.
The aim is to align as nearly as
possible the interests of individuals,
corporations and society.”
Sir Adrian Cadbury
There are a several practical ways boards can do this.
Boards should consider how stakeholders are impacted
by relevant decisions, having regard to their needs
and expectations, to maximise the chances that their
decisions will lead to the desired outcome. Seen in this
way, considering the influence of stakeholders is part of
risk management which is discussed in greater detail in
Principle 5: Risk management.
Some boards may authorise stakeholder engagement
frameworks which help guide an organisation’s work
through identifying relevant stakeholders and setting the
parameters for how to engage with them.
In some circumstances, directors themselves may become
actively involved in managing relationships. For example,
it is sometimes helpful for the chair or other directors to
attend meetings with politicians in advocacy settings, or to
meet with significant donors on behalf of the organisation.
This can help to build personal relationships and to
reflect the board’s commitment to engaging with
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Responding to feedback
It is important that organisations have a safe and effective
method for gathering feedback from stakeholders. This
information can be used to inform the delivery of services,
to develop an understanding of how the organisation
is perceived and to identify and respond to potential
concerns. Feedback should be viewed as a positive
interaction between organisations and their stakeholders
which provide an opportunity to learn and improve.
Feedback can be received in many ways; an individual
might make a formal complaint about an organisation
using an established complaint handling system or a
comment may be made through an informal channel such
as social media.
How an organisation gathers and responds to this
feedback can have a significant impact on its performance,
reputation and culture. For example, if an organisation
does not act on feedback or is dismissive of people who
raise concerns, this may impact how it is perceived by
stakeholders and create a culture in which stakeholders are
In some circumstances, complaints (especially those which
are repeated or serious) may be an indicator of poor
performance, misconduct or may in some instances be a
breach of the law.
It is a good idea to set out a policy for how the organisation
will respond to complaints and other feedback. This policy
should apply to all paid and volunteer staff and should
include to whom a complaint can be made, how
it will be handled, expected timeframes and a process for
communicating any resolutions.
Boards should aim to develop a culture of disclosure
which recognises that feedback from stakeholders, even
complaints or allegations of wrongdoing, is an important
source of insight that can help an organisation achieve its
mission and avoid misconduct.
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Protecting vulnerable people
Many NFPs, because of the nature of their work, will
regularly interact with vulnerable people. However, all
organisations that operate in the community may interact
with vulnerable people and, where they do, it is important
that there are systems and processes in place to protect
them from harm.
Many organisations will be subject
to additional legal requirements and
obligations in relation to the care of
The term ‘vulnerable people’ refers to people who are
susceptible to harm or exploitation by reason of age,
illness, trauma, disability or for any other reason.
Boards play an important role in protecting vulnerable
people such as through overseeing risk management,
compliance with relevant laws and a policy framework that
protects vulnerable people. Perhaps most importantly, the
board must seek to develop and maintain a culture which
prioritises the safety of vulnerable people.
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Questions for Directors
- Who are the stakeholders of the organisation?
- How are the needs of stakeholders considered by the organisation?
- How do stakeholders perceive the organisation and what is the impact of this?
- How does the board access and respond to feedback from stakeholders?
- How are vulnerable people protected by this organisation?
HelpfulCare has developed a comprehensive stakeholder
engagement framework that identifies who their
stakeholders are, as well as how the organisation
understands their needs and expectations. The
framework sets out a principles-based approach
to stakeholder engagement grounded in respect,
participation and transparency.
As part of their formal decision-making process, the
board considers how their decisions will impact and
may be impacted by stakeholders. To maintain an
ongoing connection with stakeholders, board meetings
begin with a ‘client story’ which helps directors
to focus their minds on how their work impacts
stakeholders. Directors also regularly engage with
stakeholders through site visits and by participating in
HelpfulCare actively seeks opportunities to gather
feedback from stakeholders and uses mechanisms such
as client surveys and market research to develop a
more fulsome picture of performance. They have also
established policies for responding to compliments and
complaints so that feedback is appropriately acted on.
Many of HelpfulCare’s clients are considered to be
vulnerable people and they have established robust
systems and processes which aim to keep their clients
safe. Among these are compliance with relevant clinical
care standards and the adoption of the ‘National
principles for child safe organisations.’
The Friendlies are a democratic, community-controlled
organisation and stakeholder engagement is central to
what they do. Their regular ‘town hall’ style meetings
provide an opportunity for stakeholders to gather
and to develop a shared vision for how the Friendlies
Stakeholders are also regularly surveyed about their
priorities and there are regular votes for members to
choose between multiple project opportunities. The
board use this information to guide their decisionmaking and are regularly encouraged by the chair to
consider what stakeholders would want.
Complaints to the Friendlies are handled in accordance
with their complaints management policy which
requires that any formal complaint is reviewed by
The Friendlies have a policy on working with
vulnerable people. One part of the policy includes
a requirement that all of their volunteers maintain
a working with children check and undergo an
annual police records check. They also make sure
all volunteers are trained in the policy, and that is