There are numerous ways to define a board's culture. Perhaps the simplest definition is a set of written or unwritten rules that guide and influence the relationships between board members and, as a result, influence board decisions. These rules have been described as ''mindsets, hidden assumptions, group norms, beliefs, values and artifacts (such as the board agenda)'' that influence discussions, engagement and levels of trust.
Board culture has also been described as ''powerful norms derived from shared values that influence behavior.'' And Herb Kelleher, the former chief executive officer of Southwest Airlines, characterized culture as ''what people do when no one is looking.''
Unfortunately, it is often easier to spot board cultures that are wanting. Recent examples are plentiful:
- Samsung - The Galaxy Note 7 smartphone that burst into flames was a revelatory crisis for the company. At the core of a series of operational shortcuts, ''Samsung pushed the envelope in terms of hardware design to command a premium for its devices.''
- Volkswagen - Company engineers installed defeat devices designed to make some its automobiles appear to be in compliance with the Environmental Protection Agency's emissions test. The company was required to pay over $15 billion in damages.
- Wells Fargo - Beginning in 2011, company employees created ''about 1.5 million accounts and another half-million credit card accounts for the bank's existing customers,'' which were, for the most part, not authorized and caused customers to pay fees ''for accounts they didn't know they had.''
Creating a Healthy Board Culture
Make a decision about the type of board that is desired This is a difficult task because there are so many factors that contribute to an effective board. No board wants to become so rigidly defined as to lose necessary flexibility. And yet paradigms of successful boards can offer guidance. Spencer Stuart has identified four models:- Inquisitive: Boards that place a premium on ''the exchange of ideas and the exploration of alternatives.''
- Decisive: These boards place a great deal of importance on ''measurable results, driving a focused agenda and outcome-oriented decisions.''
- Collaborative: These boards ''value consensus and having a greater purpose.''
- Disciplined: Boards that ''emphasize consistency and managing risks and prioritize planning and adherence to protocols.''
Conclusion
A board should always be cognizant of its culture and its cultural goals. Such self-awareness is necessary for a board to be able to modify its culture in order to respond to sudden and significant change, such as a company restructuring, change in leadership or necessary shift in business strategy. Truly successful boards not only exhibit strong cultural characteristics, but also consciously work with its members to thoroughly understand the factors that contribute to cultural excellence. This is hard, but necessary, work. In our complex and rapidly changing business environment, the ability of individual board members to take responsibility for maintaining a strong board culture that is aligned with the company's strategic goals is critical to overall success.Media Highlights
Environmental, social and governance (ESG) issues have become more complex and multifaceted than ever before. At the same time, ESG continues to ascend on board and leadership agendas.
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