"Many directors don’t know what makes their company’s culture tick," according to a recent Viewpoint by the International Corporate Governance Network (ICGN) on the board's role in overseeing culture. The paper, written by ICGN's Board Governance Co-Chair, "highlights the increasingly substantial weight placed by investors on a still fuzzy metric, noting that intangible factors including talent and culture now make up 52% of a company's market value, and citing the Edelman Trust Barometer's 2019 finding that almost two-thirds of investors now say a healthy company culture and code of conduct significantly impact their trust in corporate management. The piece warns: "companies must ... get better at telling their “culture” story to their investors and other interested stakeholders."
Interestingly, the ICGN Viewpoint is largely targeted at investors, with a comprehensive list of questions that investors should use to "ascertain how key parts of a company are run" and "ask the board to assess culture." A summarized sampling of questions includes the following:
- Can the Board describe the "actual" culture of the company? How is the executive team modeling that culture? How is management's compensation impacted where there are issues of poor conduct?
- What risks has the board identified associated with a break down in culture (employee misconduct, retention, customer retention, employee ethics, data breach etc.)?
- Does the board review how the CEO’s language matches their behavior and stated culture in external and internal communications? Are you satisfied such communication is consistent with the stated culture and values of the organisation?
- What information does the board review to assess culture, and how much of it is learned from sources other than senior management? (The Viewpoint lists examples such as customer surveys, engagement with HR, site visits or private time with non-executive employees, hotlines and social media.)