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Corporate culture often becomes a boardroom concern only after a crisis like those seen recently at Wells Fargo & Co. and Uber Technologies Inc. That has to change, according to a new report from the National Association of Corporate Directors.
The report, released Oct. 4, says boards should regularly measure and actively monitor company-specific values and behaviors just as they would any other risk.
“We’re not suggesting that we need another committee of the board that only oversees culture,” Nicholas Donofrio, a director at several companies including AMD Inc. and Bank of New York Mellon Corp., said. He co-chaired the group of directors and governance professionals that wrote the report.
“You start with the CEO, you start with the leadership of the company, and then work your way backwards,” Donofrio said in an Oct. 4 panel at NACD’s annual summit.
Most boards are confident in their understanding of the company’s cultural tone at the top, according to the results of a related NACD survey. But only half of the directors surveyed said they understand the behaviors, norms, and values of their rank-and-file employees.
The association said corporate culture is moving up boards’ priority list because of its link to performance. Its report cited research that shows organizations with highly engaged employees, one indicator of a healthy culture, perform better on customer satisfaction, profitability, and other measures.
The report also pointed to reputational impacts, changes in the workforce and workplace, and greater scrutiny from investors and the public as reasons why boards are looking more closely at culture.
Helene Gayle, a director at Coca-Cola Co. and Colgate-Palmolive Co. who co-chaired the commission behind the report, said some companies pay attention to “pieces” of culture such as pay and promotions that reward good behavior. “Few have been deliberate enough about defining culture and putting in place ways to monitor it” in a more comprehensive way, she said at the event.
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