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Jo Geraghty

Director

Culture at the heart of governance

Date added: 20th Dec 2017
Category: Leadership

A director’s duty to promote the success of the company calls on them to do far more than simply look to its profitability: FRC Corporate Governance code

If the government’s industrial strategy White Paper was somewhat lacking in respect of the role which culture has to play in delivering success, the Financial Reporting Council’s (FRC) consultation in respect of the new corporate governance code more than makes up for it.

For a start, the consultation draws on the FRC’s own culture report which “demonstrated the importance of aligning company purpose, strategy and values in order to achieve long-term success.” The importance of a robust two-way dialogue also comes in for a mention as does taking steps to ensure a strong management pipeline and promoting diversity not only within the board but also across organisations. Integrity too comes in for a mention, not only reflecting the FRC’s own mission to promote integrity and transparency in business but also as a driver of trust and long-term success.

The fact that culture features so strongly in the proposed corporate governance code is hardly surprising. After all, it has been an area of increasing focus for the FRC over the last few years. But what is particularly pleasing is that this new code leaves boards in no doubt that a director’s duty to promote the success of the company calls on them to do far more than simply look to its profitability. More than that, by commenting that ‘a poor culture is a significant business risk in itself’ the FRC have very firmly set organisational culture at the centre of strategy and delivery.

People and culture at the heart of business

Of course, regular readers of our articles and blogs will know that setting people and culture at the heart of business is something which we are very passionate about. We have all seen the damage to business reputation, profitability and trust which can arise from the sort of me first culture which promotes pay and profits over outcomes and customer excellence. And we’ve also seen the misalignment which can arise from organisations which have shunned diversity and in the process succumbed to groupthink mentality.

The 2018 world will bring many challenges but with challenge comes great opportunity. Businesses which have moved towards adopting a culture of innovation, which are not afraid to collaborate internally and externally, and which are open to dialogue with stakeholders and others are perfectly poised to take advantage of whatever 2018 brings. Those organisations will probably already have adopted many of the recommendations within the new corporate governance code, delivering a strong and diverse culture with integrity and purpose. As the FRC’s Chairman Sir Win Bischoff commented at the launch of the consultation:

Building trust in business has to start in the organisation and forming a healthy corporate culture is integral to the credibility of a company. Engaging with and contributing to wider society must not been seen as a tick-box exercise but imperative to building confidence among stakeholders and in turn the long-term success of a company.”

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