Corporate governance and culture

Corporate governance and culture: a corporate governance training guide on two interdependent principles driving organisational success.

Corporate governance and workplace culture—from among employees to between board members—are crucial combinations that feed an organisation’s health. A company’s culture provides unique organisational characteristics that help leaders identify the governance measures needed to run the company.  

Corporate governance provides systematic rules, regulations, and standard practices for sustaining culture and staying compliant. It also involves strategic steps for protecting the interests of company stakeholders, which ultimately influences organisational productivity. 

Board members and directors are essential in balancing governance and culture when managing operations. Steering too much toward either direction could upset the balance and result in costly penalties or employee attrition. 

This guide will walk you through proven tips to help board members and directors balance culture and governance.

A company’s culture mostly functions on unwritten rules that drive processes, communications, and collaborations at the workplace. While culture is defined by the actions and behaviours of each individual contributor within the company, top management and boards have a significant influence on the overall process. 

Culture, in particular, involves constantly practising corporate values. It’s one thing to merely say “this is how we work”, it’s another to ensure your entire organisation lives by that mantra day in and day out.

Board members and top management leaders can achieve this by clearly defining workplace expectations. It is also important to routinely review purpose and strategies to ensure they align with the culture. 

For instance, a company that routinely handles large volumes of confidential data would require significant investments in relevant resources and cyber hygiene training. Boards need to prioritise these commitments to ensure they protect stakeholders. In this case, the board sustains a culture that prioritises security by understanding the company’s needs and offering prompt guidance and relevant support.                                                                                                                       

Board leaders and members can improve work culture by understanding the perspectives and challenges of employees at all levels across the organisation. Seeking direct feedback from employees through post-board meetings or occasional gatherings provides exclusive insights into evolving culture based on relevant issues. 

Monitoring current cultural strengths and discussing areas for improvement with senior management enables boards to close the gaps while addressing investor concerns and priorities.

Boards are responsible for overseeing the company’s quality, management, and finances. To maintain compliance, board members and directors should regularly discuss policy reviews with the CEO and other top management leaders. 

The CEO and top management should provide the board with operational information, such as observed gaps in culture and how governance can compensate for these lapses. Board members and directors must establish and maintain governance as employees manage personal and organisational ambitions.

An open culture that lacks proper governance could lead to malpractices, costly penalties, and reputational damage. Yet, rigid governance could result in workplace dissatisfaction, employee complaints of micromanagement, and turnover. 

Boards play a critical advisory role in supporting top management toward finding the best culture-governance balance that meets changing industry demands while keeping the workforce engaged and productive. 

How do they do this?

Employees could feel more engaged and encouraged to follow guidelines when they can personally relate to the concerns and priorities addressed at work. For example, boards could recommend that top management conduct interactive activities when introducing staff to new policies. Data protection rules could come in the form of incident response training where staff experience the immediate risks and impacts of compromised data. 

Boards could also discuss with top management the most effective methods of showcasing non-compliance consequences and statistics to provide employees with precautionary case studies that encourage involvement. Prioritising employees in the narrative can help direct their focus and attention to the importance of upholding culture and compliance.

Metrics can provide extremely valuable information when assessing the balance between culture and governance. The problems is the sheer volume of metrics you could use. Boards should narrow down to whatever reveals organisational strength, then decide when top management must take interventive action. 

Top management could provide measurable culture details by analysing cultural trends, reviewing workplace behavioural trends, and projecting risk attitudes. It is integral to involve a metric for every aspect of workplace culture for optimised accountability. Doing so ensures a measurable approach to managing stakeholder expectations and governance practices. 

Boards should consider collecting culture metrics from diverse sources, on top of customers and employees. Online review sites, social media, and industry reports could provide additional insights on a company’s reputation for a comprehensive organisational health assessment.

Boards should emphasise the importance of collective effort in overseeing organisational success with culture and governance. It is critical for boards to set the tone from the top by aligning senior executive compensations and performance metrics to the desired organisational culture. Incentivising desired practices can help maintain high morale, proactivity, and engagement at work. 

These measures help ensure that top management serves as the benchmark for the rest of the company. Boards should regularly review CEO and senior executive performances to ensure that they stay aligned with desired behaviours and practices. Reviewing internal and external communications presents boards with a reliable indicator of cultural fitness. 

Boards should always consider the significant influence that proactive and engaged leaders have on each role within the organisation. For instance, a cleaner at the office could discover a crushed note in the waste basket, which contains sensitive login credentials, and promptly report it to the relevant staff to prevent a potential password breach. 

Ultimately, governance and culture must work together for organisational success. And the board serves as the catalyst that constantly adapts the workplace reality according to expectations.