Commissioner Hayne described culture as ‘the shared values and norms that shape behaviours and mindsets’; or more practically ‘what people do when no-one is watching’. He noted that while the culture of each organisation is unique and cannot be legislated or prescribed, it can be assessed. His report made it clear that an entity must form a view of its own culture, identify problematic aspects of that culture, develop and implement a plan to change them, and then re-assess to determine whether it has succeeded.
A number of NEDs commented on the challenges involved with this.
“Maintenance of an appropriate culture is extremely important, but the Board must have in place mechanisms to ensure that the required culture is not undermined or corrupted, and this can sometimes be a challenge.”
“It is clear that the expectation of acceptable outcomes/behaviour has moved and the Board is now recalibrating the ethical and moral construct within which commercial decisions are made. In a ‘post-fact’, populist world this can be very challenging.”
Despite the obvious challenges, in responding to the survey questions, the vast majority of NEDs either agreed or strongly agreed that they were clear on:
The desired culture of the organisation, including behaviours to be encouraged and behaviours for which there is zero tolerance
The reality of the culture of the organisation today, including sub-cultures and negative traits that need to change.
Approximately three quarters of all NEDs either agreed or strongly agreed that:
The Board explicitly considers how it role models the behaviours it expects
The Board spends sufficient time on understanding and seeking to improve culture
There is a plan in place to shift the organisation’s culture that the Board is confident in.
Having said that, as noted earlier, some 77% of NEDs responded that their Board is investing or planning to invest more in understanding and strengthening corporate culture. In particular, approximately two thirds of NEDs either agreed or strongly agreed that their board is:
Working to increase its visibility and engagement through the organisation
Investing in more sophisticated ways to assess and monitor the culture.
A number of their comments referred to an increase in focus on corporate culture.
“It’s insufficient that Boards set and expect a certain culture to be prevalent across the organisation. Now there seems to be an expectation that Boards verify whether this exists.”
“We have increased our attention to the risk culture, risk taking behaviour and appetite amongst management and also dialled up for more feedback from customers and employees within the organisation.”
“The Board is seeking more detail and assurance on the style and tone of behaviours than previously.”
“Part of the desired culture is making it safe to speak up, to look for faint signals. Boards need to be more vigilant than ever that the increased focus on governance and rooting out poor behaviours does not create an environment where employees do not feel safe in speaking up or where they form a view that the Board is after a completely risk-free approach.”
Partner, PwC Australia
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Senior Executive Advisor, Risk Consulting, PwC Australia
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Partner, People and Organisation, PwC Australia
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Partner, Strategy& Australia
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