At a Glance
Our panelists offer their perspectives on the board of directors’ role in corporate culture. The panelists describe tactics for more effectively measuring corporate culture and setting the tone at the top. They also highlight the difficulty of this oversight responsibility given the centrality of the CEO’s role.
This question is not often addressed and it’s important. When it isn’t addressed, you can see the negative ramifications at companies we’ve all seen in the news lately. Boards first need to know to ask questions about culture and not just look at the data management provides. It’s easy to look at whatever numbers and say “looks good” and the culture is fine. Instead, when you see the employee survey, if it’s 80% favorable, ask questions like what did the other 20% say and what themes came out amongst the unfavorable responses. If you have an ethics hotline, how many people are calling it and what are they talking about. Candidly, even board members spending time at some of the operational sites can help. I just visited a warehouse for one of the boards I’m on and was talking with employees there and getting a sense of the culture on the ground. If you’re not pressing management on this issue, it’s one where complacency can creep in, with managers and boards doing what we’ve always done and not addressing it sufficiently.
I describe culture as the values and beliefs of an organization as demonstrated by its actions and behaviors. Board members play a part in all four of those key areas. And if the board sees a disconnect between the values and the actions of the company, then the board’s role is to have a tough conversation with the CEO perhaps to the extent of asking them to leave. Obviously, while the executive is the one on the ground leading in this area, as a director, it remains critical to have impeccable integrity and walk the walk around your organizational values.
Number one, you control the appointment of the CEO, and the CEO has to embody the values that you want. If he or she does not, then the board owns the task of removing them or fixing their values. Usually, removal is easier. Number two, the same point is true of the top ten or so executives.
As a director, you also own doing your own research and digging, both formal and informal. Beyond the engagement surveys that everyone does, look at things like turnover, exit interviews, websites like Glassdoor, and observations from on-site visits. It is really important that those visits aren’t just ceremonial, and instead you’re observing the way people really think about the company from the way they talk about it and how they do their work. Sometimes that takes spending two days in a factory, office, or call center. If you just show up for forty minutes, have coffee or tea, and meet the employee of the month, you won’t get down to the reality.
Company culture is a hot topic amongst directors today as many boards determine how to measure and determine what the health of their company’s culture is. There is a lot of discussion regarding the metrics and behaviors that can be used, and if a particular board committee such as audit or CSR should be responsible for monitoring or if it is the responsibility of the entire board. Each of my boards takes it a step further and truly lead company culture by example. The CEO of Signet Jewelers is leading the team on a three year transformation of the business which includes expense savings. A new board member joined, with fresh eyes and experience from a previous successful company transformation, and suggested we support the efforts by adjusting the board travel policy to align with that of senior management, and all board members agreed. I believe company culture does start from the top.
This is really tricky because culture is set at the top, but boards aren’t in the company on a daily basis to be able to see culture and often they don’t have access or visibility until things are starting to go badly. Boards pick up the baton when something clearly illegal or unethical is reported, generally to the audit committee. Otherwise, they only get a view when onsite or in discussion with executives, so there is often limited ability for the board to have a huge impact. However, on one of my boards, there was recently an issue with a valuable senior employee taking an inappropriate but not illegal action, and it was immediately handled in an ethical and speedy way. The board got the information, gathered the relevant data, and took the appropriate action immediately. It made me feel really good about being a part of that company’s board. The buck stops with the board around culture with how quickly and effectively the board investigates and takes action after becoming aware of a problem.
I’ll admit that I felt differently when I was a CEO and holding my first Independent Director roles. But I now believe that corporate culture is absolutely the responsibility of the board for two key reasons: First, on average, board members serve the company’s shareholders longer than the CEO does. This is particularly true in my industry, technology. So, board service represents an opportunity for continuity in corporate culture over a longer term. And culture is more than a 5-year project. Second, culture is how Strategy happens. One of the board’s two key outputs is the Strategic Plan. The Strategic Plan becomes reality only when front line employees make their dozens of daily decisions in alignment with that strategy. And every one of those decisions is governed by their understanding of the company culture: what is valued, what is rewarded, what is celebrated. So, any Board that wants to see its Strategic Plan move from PowerPoint to P&L will focus on company culture … definition, development and continuity.
John Hinshaw is currently serving on the Board of Directors at Sysco, DocuSign, BNY Mellon, and the National Academy Foundation.
Matt is currently the Chair of the Board of Directors at YMCA – USA. He is also a member of the board at Zumiez and the Executive Chairman at 5.11 Tactical.
Stuart is currently a Non-Executive Director at Lloyds Banking Group and Senior Independent Director at QBE European Operations. His previous board roles include being a Non-Executive Director at Provident Financial Group and a Senior Independent Director at Swinton Insurance.
Eugenia is currently a member of the board of directors at Signet Jewelers, Hudson Group, Bunzel Plc, and Vince Holding Corp. She has also served as a board member of Women In Need and WomensForumNY, and was a Trustee at Burberry Foundation.
Laurie is a Board Member and Strategic Advisor at Zoox, and serves on the Board of Directors of Bose Corporation, Church & Dwight Co., Inc., and Noon Home. Additionally, she was a Director on the founding Board of Directors of Tesla.
Donna is on the Board of Directors at Betterment and Happy Money. She previously served on the board of Mindflash, where she was the President and CEO, as well as Boston Private.