25 August 2017 by Glenn Oborne
Glenn Oborne discusses how board behaviour trickles down to the office floor.
Corporate culture has become a significant consideration in the drive to improve governance. Following the financial crash, there has been a concerted effort to improve the culture in the banking sector, something that has been very influential in rebuilding the public’s trust.
A positive culture is now considered to be an instrumental component of stable corporate governance, yet despite this it remains an area that is not well defined and requires more attention.
The board is often seen as pivotal to the organisation’s culture. A significant majority (89%) of the 33 company secretaries surveyed by Independent Audit for the FRC’s culture project consider the role of the chairman essential in forming corporate culture, supported by the input of the NEDs.
However, across industries we speak with company secretaries who frequently encounter challenging boards, often with one or two prominent individuals who clash rather than operate in a collegial and productive way. John Watson, the chairman of Bellway, identified that within boards ‘dominant personalities can be disruptive in all sorts of ways, especially culture’.
These boardroom clashes will bring the company secretary’s role to the forefront of proceedings. They will be involved in identifying potential complications ahead of the next board meeting and attempting to get issues resolved in a constructive manner.
It is during this interaction with the board that a company secretary uses their interpersonal skills and helps manage the various personalities within the board to build strong relationships between members. All this helps foster a good cooperative culture within the board.
In addition, the company secretary is influential when advising on future appointments to boards, ensuring that expertise and balance are key considerations in the board’s decision.
With the executives working together harmoniously and creating a productive work environment, the theory is that this would trickle down across all other areas of the business, creating a positive corporate culture.
Because of this interaction with the board, company secretaries have an essential role in influencing how corporate culture is created. It is therefore essential that the desired culture is embedded throughout the company secretariat itself.
This is also due to the department’s frequent dealings with other areas of the business and its stewardship of the governance framework within the organisation.
Peter Swabey, ICSA’s policy and research director – following a series of workshops held between ICSA, the International Corporate Governance Network and the Institute of Business Ethics – identified that although the codes and regulations introduced to encourage longer-term business objectives are effective, they require departments (such as the secretariat) to ensure implementation and therefore they become reliant on company values being upheld throughout the organisation.
The secretariat must buy into the corporate values of the business. Assigning broader long-term goals to individuals within the secretariat and ensuring there is sufficient engagement between management and the rest of the team is key to achieving this.
A simple but effective indicator of corporate culture within a secretariat is staff turnover. Company secretarial departments where a positive culture has successfully been implemented, and where the department is a key resource in spreading these values across the business, will likely be more successful in retaining its staff.
This also means it is important to ensure that an individual coming into the business is the right character fit and that their own values tie into those of the business.
As one of the functions of the company secretarial department is to communicate the direction from the board to the rest of the business, this focus on the secretariat team members’ characteristics and how they are perceived is perhaps of greater significance than elsewhere in the business.
With culture being an increasingly important component of corporate governance and the long-term success of an organisation, the company secretary is able to provide a great deal of influence in this area. It is vital that corporate culture is given the attention required in order to promote good stewardship throughout the business.