Login / Register
Institute for Family Business (IFB)
  • Login / Register
  • 020 7630 6250
  • info@ifb.org.uk
  • About Us
    • Who We Are
    • What We Do
    • International Network
    • Partners
    • Contact us
    • Meet The Team
  • Membership
    • Why Join Us
    • Membership Benefits
    • Next Generation Hub
  • Events
  • Conference
    • Programme
    • Venues
    • Sponsors
    • Speakers
    • Interactive Sessions
  • Resources
    • Family Business Bulletin
    • For Owners
    • For Managers
    • For Next Generation
    • Succession Planning
    • SMEs
    • Post-Covid 19 Guidance
    • Podcast
    • Videos On Demand
    • Brexit
    • TEDx Countdown 2021
  • News
  • Advocacy
    • Influence
    • About Family Business
    • Media
    • APPG Family Business
  • IFB Research Foundation
    • About IFB Research Foundation
    • Family Business Challenges
    • Publications
    • News
    • Briefings
    • Case Studies
    • Articles
    • IFB Research Foundation Events
    • Contact IFB Research Foundation
  • Resources
  • Advice For Family Business Owners
  • What has culture got to do with corporate governance?

What has culture got to do with corporate governance?

by Kathleen Heycock, Farrer & Co

6th March 2020

 

Over the past years we have seen corporate culture gain in significance. This has included issues such as “corporate social responsibility” and encouraging sustainability, and is now moving towards environmental concerns, whether that is companies trying to be carbon neutral or by severing ties to sponsors which don’t reflect the values of the beneficiary.

But what about workplace culture? What about the people? We are all aware that the #MeToo campaign and the potentially differing values and approach to work of a younger workforce is already having a day to day impact on workplaces. But how is this reflected in “official” corporate governance?

One angle I have looked at recently is the literal one: the UK Corporate Governance Code and its previous iterations. It shows up some really interesting developments.

If we go back just over 10 years, to 2008, you would be forgiven for thinking that culture has no place in the world of corporate governance. The 2008 Combined Code makes absolutely no reference to it. There is only one reference to company values, and only then in setting them, not in enforcing or leading on them. In 2010, the word “culture” sneaks in once, but only in relation to having a culture of debate at Board level; nothing wider than that. Integrity is only mentioned in the context of the integrity of financial statements.

Fast forward to 2018 and there are 20 references to culture and it is elevated to one of the five main principles of the Code. There is an express emphasis on using a company’s culture to promote integrity and openness. Company values are also mentioned 20 times and similarly feature as one of the main principles. Looking at these key principles, you can see exactly what is now being promoted:

  • The Board should establish the company’s purpose, values and strategy and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture.
  • The Board should ensure that workplace policies and practices are consistent with the company’s values and support its long-term sustainable success. The workforce should be able to raise any matters of concern.

This shows that there has been a huge shift in emphasis over the last decade – not just to focusing on culture and values, but also on leadership and leading by example. I don’t think it’s an exaggeration to say that corporate workplace culture is fast becoming the new priority of corporate governance.

So why this increased emphasis on culture?

There are many definitions of culture, but picking just one: culture is “a system of shared values and norms that shape behaviours and mindsets within an institution”. In other words, it determines what gets done and how.

The impact of a poor culture within a business cannot be underestimated. It can lead to low staff morale, legal claims, reputational and financial risk. The impact of a major scandal engulfing a business (for example allegations of widespread sexual harassment) can be mission critical and lead to regulatory intervention, criminal investigations, reputational damage, resignations, loss of clients or sponsors and the cost of crisis management; some of this damage could take years to repair. On the other hand, a good culture reduces turnover and drives better business.

None of this is rocket science but it is good to see that this is being recognised and encouraged.


Useful links: Corporate Governance in Large UK Family Firms


Kathleen Heycock is a Partner in Farrer & Co's Employment Team. Kathleen is recognised for her pragmatic and commercial advice. Kathleen's national and international practice focusses on resolving high level complex employment law issues for senior executives, senior partners, businesses and higher education institutions. She is experienced in advising and negotiating on contractual issues, employee relations, employee regulatory issues, mediation and litigation. Find out more.

Tweet
 

Similar Articles

Family Businesses & Culture

Family business banner.jpg (2)

Family firms are rightly proud of their purpose, which provides the anchor for culture and employee engagement. Having clarity on what defines your purpose is crucial.

  • Membership
  • Advocacy
  • Privacy
  • Accessibility
  • Terms of use
  • Twitter
  • LinkedIn
  • Youtube
    • Family Business Podcast Partner
    • Rural Business Awards Partner

Proud members of Family Business Network International (FBNi) and European Family Businesses (EFB)

  

Copyright © 2019 Institute For Family Business. All rights reserved.

Company number: 4258666 Registered office: Institute For Family Business (UK), 2-6 Boundary Row, London SE1 8HP

  • Contact us