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Corporate Culture: How Far Should You Go?

 


Corporate Board Member | October 4, 2019



The Corporate Board Member article, "Corporate Culture: How Far Should You Go?" was written by Russell Reynolds Associates Consultants Anthony Goodman and Jack (Rusty) O'Kelley III on board oversight of company culture. The article is excerpted below.

When we talk to boards about corporate culture, they quickly acknowledge its importance, but worry about what is in scope and where to draw the line between governance oversight and management. While some boards are reluctant to proceed since there is no legislation or regulation to guide their oversight; many innovative boards have developed a variety of approaches for providing effective oversight.

The absence of a U.S. governmental mandate created a vacuum that has been filled by institutional investors. The so-called “Big Three” – BlackRock, Vanguard and State Street Global Advisors – believe culture and human capital management (“HCM”) both pose financial risk to investors and drive long-term value creation: they, therefore, expect directors to be prepared to communicate their oversight practices and processes to investors, whether indirectly through securities disclosures or directly during engagements.

Companies themselves are increasingly seeing culture as a competitive differentiator for attracting and retaining key workers. There is growing awareness among directors that corporate culture directly impacts operations, the potential success of transformation programs, the integration of acquired companies and thus, financial performance.

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So how far should board members go in their oversight of corporate culture? Here are five ideas already being implemented by active boards:

First, determine how the board will engage on the topic. As with other issues, directors must be careful not to cross the line between oversight and management.

To read the full article, click here.


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Corporate Culture: How Far Should You Go?