The Board’s Role in Stakeholder Governance: Five Gaps I See Consistently in Board Performance Reviews

In almost every board performance review I conduct, stakeholder governance surfaces as an area for improvement. Directors rarely dispute that customers, employees, suppliers, communities, regulators and partners' matter. The gap is how that materialises in practice. Boards often lack a shared view of who the key stakeholders are, how the organisation engages with them, what information should reach the boardroom before a decision is made, and when directors themselves should be interacting.

That is not a soft issue. Australian directors already have wide discretion to consider stakeholder interests when acting in the best interests of the organisation. AICD guidance is clear: long-term success cannot be isolated from the people an organisation employs, serves, supplies and affects. The 2024 Qantas Governance Review and Rio Tinto’s destruction of the Juukan Gorge rock shelters show what happens when those voices do not reach the board in time, or in a form that can change a decision.

Here are the five patterns I see most often, and how boards can close them.

1. There is no clear, current map of key stakeholders

The first question to ask is simple: who are the key stakeholders for this board, and for this organisation? The answers are often incomplete, outdated or inconsistent around the table. Shareholders (members, funders or Government in the case of NFPs or public sector entities) are named immediately. Customers and staff usually follow. Suppliers, First Peoples, regulators, volunteers, local communities and partners who never appear in a dashboard are frequently missing.

AICD’s five-step framework starts here for a reason. Stakeholder mapping is a strategic exercise, not a communications one. Stakeholders are groups with an interest in the organisation, groups likely to be affected by its actions, and groups whose actions can affect the business model. That mix changes and evolves when strategy changes. A new service line, a merger or a shift in community expectations can move a previously peripheral group into the centre of risk.

What works in practice is a management-prepared map, reviewed by the board at least annually and tied to purpose and strategy. Prioritise - not every stakeholder needs the same intensity of board attention. The test is long-term value, impact (positive and negative) and the capacity of that group to affect the organisation. Recalibrate after any material event. COVID-era decisions, industrial disputes and heritage controversies have a habit of revealing stakeholders the board thought it already understood.

For NFPs, the people the organisation exists to serve should sit at the top of the map. Purpose does not confer immunity. The 2026 independent review of cohealth is a recent reminder: a purpose-driven community health board still lost trust when patients, staff and local communities were informed after a clinic-closure decision rather than consulted before

it.

2. Boards lack insight into how the organisation interacts with stakeholders

The second gap is operational oversight. Directors often receive a polished stakeholder slide once or twice a year. They rarely see the system: who owns each relationship, how complaints escalate, how small-supplier payment terms are monitored, how customer harm is identified beyond an average NPS score, or how cultural heritage and human-rights issues move from the front line to the board.

This is the board’s systems-and-processes role. Day-to-day engagement belongs to management. The board’s job is to be confident those systems exist, that they are resourced, and that the information they produce is not overly curated.

Qantas’ Governance Review is instructive. After COVID, the board treated reopening as operational rather than strategic. Customer failures, cancelled flights and an adversarial tone with stakeholders compounded into a loss of trust. The board was financially oriented and needed a stronger view of non-financial risk. One improvement theme was explicit: hear stakeholder voices with more rigour, and adopt more open two-way communication.

Rio Tinto’s Juukan Gorge failure shows the same pattern in a different sector. The company had legal approvals. What it did not have was a system that got material new information about cultural significance to the right level of seniority in time to stop the blast. Executives departed. Directors did not stand for re-election. Investors forced accountability because process had failed, not because the law had been broken.

I encourage boards to ask: who owns each material relationship? How do complaints, grievances and concerns escalate? What independent sources can we use to test management reporting - advocates, regulators, community leaders, unfiltered customer and employee feedback? Averages can hide harm. Boards need the outliers to get the right level of information.

3. Boards are unclear on how and why they should engage

Directors can often swing between two unhelpful extremes: never leaving the boardroom, or wandering into management’s relationships without a purpose. The question is not whether the board should meet stakeholders. It is, for this group and this issue, what is the purpose of the interaction?

Purpose might be testing whether management’s account is complete, signalling that the relationship matters, hearing an unfiltered view before a strategy or crisis decision, meeting a cultural expectation of peer-to-peer engagement with First Peoples leaders on Country, or rebuilding trust after a failure. It should not be public relations, and it should not replace management’s job.

Most engagement sits with management, and the form of it must be designed around the stakeholder, not the board’s convenience. Respect, continuity, recognition of power imbalance, and closing the loop after people have given their time are the hallmarks of good practice. Last-minute consultation is quickly read as insincere.

Mechanisms that work without blurring roles include a customer or client moment at the start of a meeting, site visits and town halls where directors listen more than they speak, advisory committees with a director as observer, meetings with advocates and peak bodies, and stakeholder days that put competing interests in the same room. Agree the rules of engagement with management before directors step in. Visibility in a crisis can be necessary. Undermining a relationship management has spent years building is not.

4. Board papers don't put stakeholder impact in front of the decision

This is the gap that most directly affects decision quality. In review after review, I read papers that set out the financial case, the legal position and the recommended option - and treat stakeholder impact as a paragraph near the end, if it appears at all. Directors then decide and may discover the reputational or human consequence afterwards.

Material papers should answer, in plain language: which stakeholders are affected, positively and negatively; what those stakeholders have already told the organisation; what leading indicators are saying; what options and cumulative non-financial risks sit on the table; how the decision will be communicated to those affected; and whether the board itself needs a direct conversation before deciding.

The cohealth review shows how this looks in the papers. The June 2025 board paper on the clinic closures downplayed the likely community reaction and even suggested the decision could enhance cohealth’s standing. The Board Community Advisory Committee was not consulted because some of its members were patients. Reviewers later found the strategy was informing staff and community after the decision, not consultation.

That aligns with AICD’s decision-making step and with the draft fifth edition of the ASX Principles, which recasts Principle 3 around culture and engagement with security holders and other stakeholders. Committees can help if they do not become a parking bay. The Chair’s role is decisive: agenda design, time allocation, and the discipline to ask whose voice is missing from this paper.

In reviews I often find the Chair and CEO already hold most of the organisation’s senior stakeholder relationships. That is useful - and it is a risk if the intelligence stays in that pair. The Chair can put those relationships to work for the whole board without turning every director into a public face. After a meeting with a regulator, peak body, community leader or major customer, the Chair should bring a short, unvarnished summary into the next board or in-camera session: what was said, what surprised them, and what it means for the papers in front of the table. The Chair can also decide, with the CEO, when another director should join an engagement because of a particular network or skill, and when the board should pause a decision until a missing voice has been heard. Used this way, the Chair is not a second executive. They are the person who converts private conversations into shared board judgement - and who stops stakeholder management becoming a Chair–CEO sidebar that the rest of the directors only see once something has gone wrong.

5. Directors’ own networks are left unused

The fifth pattern is the one boards find most awkward. Directors are appointed, in part, because of the relationships and judgement they bring. Yet many boards never ask, in a structured way, how those networks could support the organisation’s purpose - introductions to community leaders, industry bodies, regulators, funders or First Peoples organisations - without turning the director into an unpaid lobbyist or creating a conflict.

Used well, a director’s network is a source of unfiltered intelligence and a bridge into rooms management cannot easily enter. Used poorly, it becomes an informal back-channel that blindsides the CEO.

A simple discipline helps. Once a year, as part of the skills matrix and stakeholder map, ask each director which relevant relationships they already hold. Agree with the Chair and CEO when a director may open a door, and how that contact will be briefed and reported back. Record interests that create a conflict. Include stakeholder literacy in induction so the board is not relying on one director to “cover” a whole community.

This is not about a token stakeholder representative, although some NFPs do that well. It is about using the board you already have.

What good looks like

AICD’s framework remains the cleanest way to organise the work: identify and review stakeholders against purpose; agree the board’s role with management; engage - mostly through management, directly when it adds value; put stakeholder impact into papers and decisions; and evaluate the health of the relationships, including with independent data.

None of this requires directors to agree with every stakeholder view. The standard is to inject themselves into the issues and think them through.

When I am conducting a review, I am less interested in whether the board says stakeholders matter than in whether a director can answer four questions without looking at a slide. Who are our material stakeholders this year, and why? How do we know management’s picture of those relationships is complete? What stakeholder impact is sitting in tomorrow’s papers? Which relationship am I personally responsible for helping the organisation build or repair?

If those answers are vague, there is potential that the board is governing with a blind side. The legal discretion to consider stakeholders is already there. The work is to make it operational - in the map, the systems, the papers, the room, and the relationships directors already have.

If your next review keeps returning to stakeholder governance, treat it as a strategy issue, not a communications gap. That is where the value, and the risk sit.

Kylie Johnson FCPA FGIA MAICD is Principal Consultant at Sadhana Consulting, specialising in board performance reviews, CEO evaluations and governance for government, NFP and corporate boards across Australia. To discuss a review or book a discovery call, visit sadhana.com.au.