Boards are responsible for ensuring corporate executives shape culture, ethics, and compliance.

Creating a culture of ethics is a business imperative. It is vital in this era where attention to stakeholders is a priority, and where culture is understood as a key driver of business performance. Why a company exists and how a company operates is as important as what it does. It isn’t just about short-term shareholder value anymore. It’s about taking that longer view, and being accountable to people and planet as well as profit.

It is critically important to realize that in a hyperconnected world where information about your actions travels instantly to any interested party, people watching you will judge not just what you do, but how you do it.”

Dov Seidman, Founder & Chairman, LRN

Responsible stewardship

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.

12 steps to operationalize tone from the top:

Get the LRN guide on steps you can take right now.

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Activating culture

The best business strategyand the most professional and technically sound compliance approachescan 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.  

Measurement

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?

Oversight

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?

Accountability

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

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?

Activating culture and ethics from the boardroom:

Learn what corporate directors are saying right now about building ethical culture in the report from LRN and Tapestry Networks. 

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Increase engagement

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LRN offers a board-focused Catalyzing Conversations Toolkit designed to enable interactive, live training sessions of board members. It includes video content, a facilitator’s guide, and supportive resources. Connect with an advisory expert to learn more. 
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Bespoke, LRN-facilitated board sessions explore the evolving landscape of ethics and compliance, leveraging experiential case studies to inspire discussions around effective oversight and building tone at the top. Connect with an advisory expert to learn more. 
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Across a range of responsibilities, we simply expect much more of boards of directors than ever before."

Jerome Powell, Chairman of the Federal Reserve

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