BY Fraser Tennant
Organisational culture is fundamentally important to corporate strategy and performance and should be embedded into decision-making and oversight processes, according to a new report released this week by EY.
The report – ‘Governing culture: practical considerations for the board and its committees’ – highlights the importance of culture to businesses, but, at the same time, suggests that the deliberation and focus in this area by the boards of many companies is often not adequate and appropriate.
Indeed, the EY report suggests that boards could be doing more, and cites a recent survey of FTSE 350 board members (conducted by EY and the FT) which saw the majority of respondents stating their belief that their board should take greater responsibility for shaping and monitoring culture.
Moreover, although 86 percent of survey respondents said that corporate culture was fundamental or very important to their company’s overall strategy and performance, only 19 percent said the board has primary responsibility for embedding it. In addition, 47 percent felt there was little or only partial consensus at board level as to what company culture should be.
“The board has an important role in relation to the political, social, performance and operational architecture that shapes culture”, states the EY report. “This begins with creating the vision for the desired culture within the organisation. Responsibility for bringing that vision to life and embedding it within operations or sometimes driving change falls to management, but the board must then apply rigorous methods for assessing, monitoring and overseeing culture.”
Whilst recognising that the concept of culture poses a great many questions from a governance perspective, the report stipulates that boards and board committees must apply a cultural lens to their roles and responsibilities to fully embrace the governance challenge. “Culture shouldn’t just be a hot topic for discussion, but also for governance action”, the report concludes.
As well as drawing on the findings of the EY and FT board survey on culture, the new EY report also showcases data from a recent paper by EY’s Corporate Integrity team: ‘The route to risk reduction: better rules or better decisions?’