Once the banking sector started to implode and the various scandals came to light there was a lot of talk about the ‘culture’ – a concept that is not always easy to define. Now, the Financial Reporting Council (FRC) has issued a new version of the code that clearly states that company boards are responsible for ‘establishing the culture, values and ethics’ of their organisations it is time to get serious about culture.
Corporate culture is not new. The consequences of national cultural differences was investigated by Dutch Social Psychologist Geert Hofsede in the 1980s and the idea popularised as ‘the ways we do things around here by – McKinsey consultants Terrence Deal and Allen Kennedy.
It has not been such a specific concern at board level, however until more recently. In July Peter Montagnon, Associate Director at The Institute of Business Ethics (IBE) in collaboration with EY and the Chartered Institute of Internal Auditors (IIA) produced a new report entitled Checking Culture: A new role for internal audit.
It’s a nicely provocative title but what is it saying? Via a thoughtful introduction and the edited highlights of a series of interviews conducted earlier this year it suggests that once the board has ‘established the culture’ then somebody needs to take a peek under the bonnet to see if the values and ethics have been successfully cascaded down though the organisation. Internal auditors, the authors assert, are surely the people to carry out these checks as they go about their normal business.
This opinion is not shared by Evening Standard journalist and contributor to Governance and Compliance, Anthony Hilton. He suggests it is akin to putting actuaries in charge of a night club. Indeed, judging from the interviews, internal auditors themselves feel far from certain that they are able to do this effectively. Speakers at the panel event held to launch the report expressed the view that the internal audit process might be able to help but that it takes a whole range of people – including those in HR, compliance and risk – to get a handle on culture. Even then, it is not so straightforward that a neat little dashboard of metrics – so beloved of all boardrooms – can be produced.
The research conducted by IBE on behalf of IIA is certainly worthwhile but I wonder at the ability of boards to set the cultural tone in the first place nevermind manage or monitor it in a meaningful way. As somebody suggested from the floor at the launch, an organisation is made up of many cultures – national, departmental, managerial – how do you manage all of that? Culture is more likely to be set by executive leadership behaviour – more visible in a business than from the more distant boardroom and therefore capable of being more pernicious or transforming in its effects.
All of this did get me thinking about the role of the company secretary in this debate about culture. Professor Andrew Kakabadse in the ‘The Company Secretary, Building trust through governance’ described the company secretary as the critical link between the board and the executive. He or she is very likely to be the person around the board table who has been with the organisation the longest with, potentially, the best network across the business. As somebody who has seen what has worked and why and the person who knows what ‘really goes on around here’ is there anybody better positioned to take the corporate cultural temperature?
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Chris Glennie is Business Development Director for ICSA. In this role, he is responsible for the development of the Institute's portfolio of qualifications, the development and smooth running of all member and student services, as well as all marketing communications activity.