The Board’s Oversight Of Culture

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Great governance affords teams and companies greater ability to capitalize on opportunities.
Board’s Role in the Company’s Culture

Imagine moments in which culture impacted your life. In business, culture is a motivator and a key ingredient to our purpose and meaning as employees. Each of us working for a company as an employee is a member of the team. Teams have leaders and the responsibility to set the tone for the right culture for the team starts with those leaders. Great leadership is about inspiring a positive culture so that each member of the team is moved to perform at their highest or best purpose. Success isn’t about the leader, it’s about the team.

How a Focus on Culture Is Driving Change

The emphasis on environmental, social, governance (ESG) and Corporate Social Responsibility (CSR) is born from a concern for our culture. How companies respond to ESG and CSR issues factors not only into shareholder and investment decisions, but also into decisions made by, just to name a couple, cities considering which new businesses to court and prospective employees considering which opportunities match their personal and professional priorities. The response is a strong indicator of a company’s culture.

Governance is the foundation on which an effectively managed organization is built and culture is promoted and elevated. This foundation includes policies and procedures that provide for opportunity and accountability. An effective governance framework includes structural elements that facilitate valuable board, management and stakeholder communication and interaction. These elements include:

• Charters that clearly articulate board responsibilities and limitations

Fundamental working principles that promote long-term growth and value

Provisions for effective two-way shareholder communication

Board selection criteria and an annual assessment process that promote effectiveness

Following the rules and regulations of culture, a nation and a jurisdiction

• Oversight of both individual leader and corporate culture bias

Allowing management to manage for the long term

A company culture framework that messages employee and stakeholder respect

Governance and culture are inextricably linked. Great governance affords teams and companies greater ability to capitalize on opportunities. The operative word in our definition of corporate governance is opportunity. Often, academics and leaders will opine about the need for enterprises to “think like an entrepreneur.” Well, entrepreneurs eat, sleep and drink opportunity. An excited, excellence-focused business culture will devour a stale, uninventive one.

How Leaders and Boards Influence Culture

There are signs that we are improving and evolving towards a more enlightened culture shift in business globally. For starters, the expectation for boardroom gender parity is gaining widespread acceptance. Groups like Corporate Board Member are active promoters of governance excellence.

Stakeholders are calibrating their leadership expectations to include board and management alignment, and the extent to which the relationship, vision and interaction set the right tone for the right culture. As we’ve noted, among highly skilled young workers, a company’s culture is central to considerations of employment options. We’ve observed that this will continue as long as employment conditions favor the job seeker.

To attract top talent, boards and management should understand this: An important distinction exists between two dominant culture groups: one, a culture of continuous improvement that rewards the drive to succeed creatively, and two, a culture of fear and rebuke where the spirit of confidence is inhibited.

Great leaders infuse the culture around them with that magical sense of “I can be the best me” at this job. In the best organizations, a deep sense of purpose saturates the organization and becomes a cultural value. Culture is ethereal and yet describable. A senior management team and board aligned on being the best they can be are likely to positively infect their company’s culture, as well. Great culture promotes good governance. Good governance sustains great culture. Team efforts that encourage employees are solid ground on which to build a successful company.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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