LRN understands that boards are key players in driving excellence in culture, ethics, and compliance. Our experts recognize what good organizational stewardship looks like and why being prepared for scrutiny from shareholders, customers, employees, the public, the media, or regulators is an essential aspect of board leadership. Fostering an environment where people have the confidence to do the right thing is crucial. It takes time and priority. And it must flow from the board, senior management, all the way down to frontline managers and the grassroots throughout the company.
The best business strategy—and the most professional and technically sound compliance approaches—can fail when leaders fail to understand that culture drives business outcomes. Corporate directors from the largest companies are now talking about activating culture and ethics from the boardroom. Four key themes are emerging from these conversations, initiated via the Ethics Culture and Compliance Forum hosted by Tapestry Networks and LRN.
There are tools and techniques for measuring culture. Directors fear, though, they are not well-positioned to “read” corporate culture, which they find to be inherently challenging to interpret. Said one corporate director, “There are barometers you can read and statistics you can see, but I'm not sure you can measure culture without [also] feeling it.” There is, however, increasing evidence that the underlying drivers of ethical culture can and are being measured, and boards need to insist management is doing so. Identifying patterns and trends is difficult—but important. Directors worry that, despite the data they receive, they may not be seeing the patterns or trends that indicate an emerging ethical or cultural crisis.
How are you measuring culture, ethics, and compliance?
Boards wrestle with the most effective oversight structures. Directors agree that culture, ethics, and compliance demand significant time and effort, but recognize that they sometimes struggle to give these issues due attention on crowded board and committee agendas. “There is nothing more important than giving the board enough time to address culture,” said one corporate director. “Culture oversight is less about positioning the board for culture, than positioning culture for the board,” said another director.
How do you frame culture on your board’s agenda?
Boards are responsible for ensuring that executives shape culture and compliance. All agree this is non-negotiable, but approaches differ. “Boards have no reservations about holding top executives responsible for business performance, but they also need to be held accountable for the culture they're establishing," said a director. Directors differ in their approaches to the most effective and appropriate ways to hold management accountable, particularly about the degree to which ethics and culture can be integrated into compensation. If the board is limited in its complexion, it may have built-in blind spots; demographic makeup of the board can impact how culture topics are prioritized.
What practices are you prioritizing?
Trust is crucial and yet can be difficult to maintain. Trust is a key enabler of transparency; it is indispensable to a board’s ability to oversee culture. Deeper forces like trust, fear, and organizational justice can be measured but frequently are not. Said one corporate director, "Trust enables ethics, culture, and compliance. Trust, but verify." Said another, "I'd rather have a lot of speak-up calls than have employees not trust us and take complaints outside the company." Whichever way you look at it, leaders that fail to prioritize, model, and maintain trust throughout the organization and with the board are at risk—as is the performance of the companies they lead.
How do you manifest trust?