company culture

Company Culture Starts With Corporate Governance

You’ve seen the headlines—“company culture” is one of the most-covered topics in business leadership over the past couple of years. You can read about why you shouldn’t just let your company culture happen.

You can explore “Why Corporate Culture Is Becoming More Important.” And, you can see how productive culture will boost your organization’s performance.

Before we launch into how company culture begins with the board, let’s define the term we’re using.

The Definition of Company Culture

According to Wikipedia, company culture (also referred to as organizational culture) “encompasses values and behaviors that contribute to the unique social and psychological environment of an organization…and includes the organization’s vision, values, norms, systems, symbols, language, assumptions, environment, location, beliefs, and habits.”

Yes, that’s a long definition! To simplify, culture is created through a blend of the practices, policies, and people that make up an organization.

So how exactly does your board of directors fit into the world of company culture? It might seem like company culture is guided heavily by the CEO. However, boards set the tone for CEOs through hiring decisions and succession planning.

As Spencer Stuart explains, “Boards can ensure that the CEO and executive team have the cultural fluency needed to define culture, and that they are attentive to culture and its impact on business performance.

To this end, boards may decide to consider an executive’s ability to manage culture as part of individual performance reviews and the succession planning process.”

So outside of CEO selection, how do board members “set the tone” for a positive culture inside of the company?

Company Culture Starts in the Boardroom

Culture all starts with organized, transparent, and intentional corporate governance.

When C-suite leaders trust that board members are giving the company their best, they are freed up to address other culture issues. They’re also freed up to strengthen and grow the positive elements that already exist.

Take the example of light of recent corporate scandals at big-hitters like Uber, Wells Fargo, and Equifax. Boards are realizing that corruption, unethical behavior, and other negative, cultural qualities can ultimately damage a company’s bottom line.

In fact, the National Association for Corporate Directors picked up the topic and ran with it in their recent report, “Culture as a Corporate Asset.” The gist of the report can be gleaned from a few lines at the beginning of the report, which state:

“As directors, we have a responsibility to bring more rigor to the discussion about organizational culture. We are well-positioned to play this role: directors’ independence is an advantage, not a hindrance, in culture-oversight activities.”

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