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The tragedy of a poor culture: directors who fail in their duty to exercise reasonable care, skill & diligence, letting down the ‘good people’ who rely on them
I never suspected:
Three of the saddest words in the English language and yet three words which highlight just how far a relationship can go astray before problems come out into the open. And when we are talking about a relationship of two people then perhaps that is the case. But what about when the relationship is between a company and its employees, its shareholders, its customers and the wider world; can we really say that such a relationship can go sour without anyone suspecting?
Sadly it seems that in far too many instances collective blindness is the order of the day. Just think of the number of scandals and corporate collapses that we have seen in the past decade in which businesses which have seemingly sailed on calm waters suddenly foundered thanks to a single report or incident. And how many times do reports into that collapse blame failings in culture and management and leadership which may have been simmering for years.
You can’t tell me that no one in the organisation knew what was going on. When reports of poor culture and sexism hit the headlines, inevitably they are followed by a parade of current and former employees all commenting that they raised problems to line managers or HR and nothing was done. When one arm of an organisation gains notoriety for putting profit ahead of customer service, previous disclosures of disquiet and unease swiftly come to light. And yet ‘I never suspected’ seems to be the order of the day.
Take Northern Rock for example. It’s ten years since it collapsed and we are still learning lessons about culture and interaction and people. Commenting to the BBC in a special report marking the anniversary Gary Hoffman, who was put in to try and rescue the bank said “The management had completely lost touch with the coal face, and did not know what was happening. There was an attitude that you did not question what was going on, which was a tragedy because there were extremely good people at the bank.”
Contrast this with the statement put out by Bell Pottinger on 6 July 2017 which included the comment that “As soon as we were made aware that we had been misled and that work was being done which goes against the very core of our ethical policies, we acted immediately. At Bell Pottinger – a proudly diverse and international team – we have good, decent people who will be as angered by what has been discovered as we are.”
That’s the tragedy of a poor culture in a nutshell. Directors who fail in their duty to exercise reasonable care, skill and diligence, letting down the ‘good people’ who rely on them. Those good people may be employees or investors or customers; they may not even be directly involved with the organisation but can be affected by failings in sustainability or safety. Whoever they are they deserve more than a leadership which claims to be unaware of failings under its watch.
The UK corporate governance code is currently under review. As part of this the FRC has overhauled its website and mission statement. This now reads “Our mission is to promote transparency and integrity in business” with a statement clarifying that “Integrity aligns better with the governance outcome we seek through our work on culture and the role of leadership.” Let’s hope that the new emphasis on culture and integrity sees corporate leaders being more aware of and acting more swiftly to curb culture failings. Then and only then will ‘I never suspected’ disappear from the business lexicon.