Blog : BOARD TALK
|Posted on October 20, 2015 at 1:35 PM|
We have been talking about corporate culture and its failings since the financial crisis - even longer than we have been talking about the insurmountable difficulty of putting women on boards.
Yesterday evening in London at the Institute of Directors a panel led by Simon Walker, the Director General who has been outspoken in the recent past about both executive pay and behaviour, had another go.
From L to R: Simon Walker, IOD DG/Philippa Foster Back, Director Institute of Business Ethics/David Styles Director of Corporate Governance FRC/Ben Mathews Group Company Secretary HSBC/Simon Osborne CEO ICSA
The word 'nebulous' came up a lot. It is clearly not an easy thing to define 'culture' but words like that are not going to help in what is a critical task.
I had just come from an event at Standard Life Investments held as part of #GoodMoneyWeek, where the presentation had ended with some thoughts from Sir Mark Moody-Stuart, whom I had the pleasure of interviewing last year.
Sir Mark Moody-Stuart, Chairman Hermes Equity Ownership Services at Standard Life Investments London Office October 19, 2015
"The question of penetration of values in business involves what is perceived and seen (and given) as reward for not pursuing profit" said Sir Mark.
In other words, it is what happens when a business holds back, from digging that oil well because of concerns about safety, or Environmental, Social, Governance (ESG) concerns.....or - say - hesitating when creating consumer financial products to be sold to those who will never ever benefit from them because they are fundamentally not in the consumer interest. (My interpretation there, but I am confident he would say it is about thinking for the longer term, and rewarding the manager or individual who expresses that doubt when a business is thinking a new product, or considering a new sales strategy.)
So....when we say corporate culture is about thinking 'for the long-term' and embedding 'values' throughout the business, we are really saying it is about being more thoughtful, about hesitating in the relentless pursuit of profit in favour of broader societal goals and with consideration of a wider group of stakeholders. It is about putting the recognition that it is all about human beings back into business.
Then there is the challenge of ensuring that every individual in the business knows that is the company ethos, going forward.
But it can be defined by clear metrics - as Ben Mathews (ex Rio Tinto) said, expanding on Sir Mark's thoughts as they resonated with his own experience.
There seemed to be a desire on the panel to move away from discussing the extractive industries, possibly because this sensitive story had just landed about the IOD. Mr Mathews unwittingly reiterated some of the views reflected in it, when he made it clear in a broad context that the loss of human life was the ultimate failure of corporate governance.
It may be clearer to see in the extractive industries - but the ethics around the PPI scandal in financial services suggest that lives can be ruined forever, even if they are not taken, by governance failings.
Simon Osborne, CEO of ICSA (whose software arm is now in a third year of commercial sponsorship of this blog with no editorial control) echoed what Sir Mark said: "When everything seems to be on a roll it take a lot of moral courage to say are we doing the right thing."
But there are, as Mr Osborne said, many things that could be done on culture - including proper director and board evaluations, done regularly by objective evaluators. Employee awareness that there is true accountability is an essential part of establishing the right culture.
Whistleblowing, as someone on the panel remarked, could be taken as a sign that corporate governance is working well.
And accountability, it seems, is in vogue when it comes to the younger generation, on all levels. I attended the Standard Life Investments event after publishing the results of their poll, conducted with YouGov, on millenial expectations. Take a look.
It is becoming horribly repetitive to say the world is changing very fast, but it is - and those running businesses need to keep up. Standard Life Investments has called out a commercial business opportunity, not a waffly 'cuddle a millenial' campaign. They are the future.
From where I sit, it looks as if the same mentality that is not coming to grips with technological change is the one that still struggles with diversifying boardrooms by focusing on all the obstacles - rather than changing the company and boardroom structure to include advisory panels that will attract fresh thinking.
It isn't as if some of these ideas have not been expressed before, but the number of brave voices has suddenly become louder.
Brave, because we all know that really - whether it's about women in the boardroom or changing 'culture', it's fundamentally about changing values and shifting power and that makes people who have it very uncomfortable indeed.