A research report claims that boards across Europe are struggling to give the issue of corporate culture adequate time and attention. The report, Board Leadership in Corporate Culture was produced by Board Agenda along with law firm Mazars and business school INSEAD.
It found that nearly two-thirds of European company directors work on boards that either fall short of giving corporate culture significant attention, or fail to include it in their formal risk management systems.
The findings will be disappointing for firms trying to up their game and tackle the tricky issue of good governance.
Why does culture matter to boards?
Culture has been recognised as the key component in a well-governed organisation. The Financial Conduct Authority has repeatedly talked about the need for a ‘culture of compliance’. With directors criticised recently for being complacent about compliance, any course of action that can help to deliver better ethical performance should be explored.
The list of regulations Boards need to contend with is expanding all the time – for example, the GDPR requirements coming into force in May 2018 and the proposed revisions to the UK corporate governance code. It’s more important than ever that organisations are structured with good governance at their heart.
For many, this means a determined focus on corporate culture to ensure that the right approach is driven from the top.
Why is it such a challenge?
The research cites a number of reasons why boards are struggling with culture:
- A lack of time. Culture gets insufficient time on meeting agendas for many. More than a quarter (26.5%) said that they needed to ‘devote significant additional’ time to the subject.
- The tone isn’t set from the top. In spite of respondents ranking ‘setting the tone at the top’ as the leading way to influence culture in their business, boards are failing to walk the talk when it comes to culture.
- An inability to integrate strategy concerns with culture. Half of respondents claimed their organisation has significant gaps between their defined purpose, strategy, and company culture.
- They don’t have the data they need. The report says that ‘boards could be hampered in their efforts to consider culture if their companies fail to gather relevant data’. Just 5% of participants felt very confident in the data at their disposal. Providing directors with the information they need plays a big part in enabling them to make fully-rounded decisions.
What influences corporate culture?
Tone at the top, as we mentioned, was ranked number one when board members were asked to list the most important influences.
‘Ensuring that the chief executive is on board with company culture’ came second, with ‘having a boardroom recruitment process that supports the desired cultural outcomes’ third (read more here about how to ensure you have the best process for appointing directors).
How can you get behind the drive to improve culture?
- Make time to discuss cultural issues. Ensure board agendas leave space for this among the other topics for discussion. If you struggle to get through your agendas, read our tips on how to make your board more efficient for advice on best practice planning and meetings. You can pick up more tips from recent research on maximising board effectiveness.
- Make sure members have the data they need to debate and decide. There is a wealth of valuable data within organisations, but it doesn’t always make it into board papers. Do your packs include all the corporate information, past papers and other data your directors need to make choices on culture? Are they presented in a user-friendly way that encourages directors to read and engage with them? Find out how to give your members the information they need so they are all reading from the same page.
- Have the right combination of directors. Coming to rounded conclusions means considering a range of opinions. Explore the ideal mix of perspectives for your board and how to achieve it.
Improving culture is an essential step if companies are to meet their regulatory obligations and protect their reputations. Ethical performance is increasingly valued – and increasingly visible. Hopefully these steps will help to point your board in the right direction.
If you want to read about how one organisation improved efficiency, saved money and improved their own performance, read our case study detailing how Scottish Building Society’s new approach to board papers improved more than just their meeting packs. You can download a free copy here.