Stakeholder engagement and the UK corporate governance code
The aim of the thesis is to investigate whether the stakeholder engagement provisions of the UKCG Code 2018 are effective. Historically, corporate governance disclosure has been poor, which has undermined trust, accountability and confidence in companies. The UKCG Code 2018 was introduced to address the lack of transparency and corporate scandals related to poor governance practices and it attempts to achieve this by emphasising the significance of a positive relationship between companies and wider stakeholders. This PhD study uses mixed methods and consists of three stages. The first stage involved content analysis of 150 annual and sustainability reports from the year 2020, including companies from FTSE 100, FTSE 250 and FTSE SmallCap. Stage two involved self-completion questionnaires with corporate governance officials (n=61). Stage three involved follow-up interviews with corporate governance officials (n=12). The research findings show statistical differences in how FTSE constituents and industries provide stakeholder engagement disclosure in company reports. Furthermore, it provides evidence that the UKCG Code 2018 makes unrealistic assumptions regarding how engagement works in practical settings. These include the suitability of recommended engagement methods for workforce engagement and how the interests of stakeholders are considered in decision-making processes. The findings demonstrate that engagement has improved with key stakeholders, such as shareholders and employees, as a result of the 2018 UKCG Code, but this has not impacted engagement with wider stakeholders, such as the community, pension trustees, NGOs, industry bodies and media. Neglecting wider stakeholders leads to inequality and could escalate the likelihood of conflicts. This study has contributed to knowledge by demonstrating the various challenges that corporate governance officials face in complying with the UKCG Code and engaging with stakeholders. These challenges include managing the vast number of stakeholders and their expectations, dealing with the inertia generated by a lack of interest by stakeholders in engaging with companies, managing conflict with stakeholders, as well as specific difficulties in complying with stakeholder engagement provisions and section 172 of the Companies Act 2006. The study proposes reforms that could be implemented to improve compliance and encourage companies to engage with wider stakeholders.
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