As a Board member, how do you know that the culture of the organisation under your stewardship will deliver the strategy ethically and successfully?
Boards have faced more change in the last few years than they’ve seen in several decades, but the experts say that more is required. Look at the recent case of AWB, Commissioner Terence Cole states in his report, “At AWB the baord and the management failed to create, instill or maintain a culture of ethical dealing.“ The AFR 20 December 2007, Pg 10
How then does a Board assess culture to determine whether it can prevent events that serve as early warning signs from becoming full-blown disasters for example, fraud, manipulation of financial data, loss of financial data, a declining safety record, loss of key leadership, depleted morale, supplier favours, non compliance issues or corporate governance? How does a Board know where and how the culture within the company can be strengthened so that it proactively supports the succesful transformation of strategy into execution and therefore shareholder returns? Katharine McLennan, Practice Leader Leadership & Teams discusses solutions to this critical issue in the Mettle Detector Paper entitled How do you Know?
Boards have faced more change in the last few years than they’ve seen in several decades, but the experts say that more is required.
The reform of the role and operating focus of boards first came under review in the 1980s. The successful entry of foreign competitors into the US brought light to the fact that many of the companies’ strategies were flawed and had not been adequately challenged by boards. As corporate takeovers intensified in the 80s, boards had to determine whether they were more beholden to management or to the shareholders, and they began to decide quite consciously it was to the latter. The arrival of institutional investors demanded that corporations begin to deliver long-term profitability and that more of the directors be independent to ensure greater transparency for the investors.
By the end of the 1980s there was still work to be done. A critical review of Boards was published in 1989, entitled “Pawns or Potentates: the Reality of America’s Corporate Boards,” written by Harvard professors Jay Lorsch and Elizabeth MacIver. In this work, the authors argued that boards were still powerless. They were too polite. There were still too many insider members. They were still dependent on a CEO who controlled the agenda, selected the directors, and in many cases acted simultaneously as the chairman. As a result, ongoing reforms were instituted including:
- using independent directors to chair nominating committees
- using more experienced and retired CEOs who had time to spend diligently in their duties as directors
- tying director compensation to long-term stock options
- increasing the number of committees involved in overseeing strategy and execution
- instituting formal CEO reviews
- establishing a separate chairman to set the agenda, conduct the meetings, and select the directors
Podcast: The Role of Culture in Managing Risk 
The podcast discusses the goals a business must have to avoid risk and to maximise it success, that is, to make the best possible balance between risk and reward. As well as good compliance protocols and analysis of productivity, a critical element that is often overlooked is softwiring (the people side).
Softwiring gives you another way to manage the risk in a cost-effective way. Without a values-driven culture, no matter how many protocols you put in place, it is impossible to implement risk strategies effectively. You need the commitment and buy-in of your people. Jeremy Nichols and Catherine Glass explain the ways businesses can start the risk assessment and people commitment journey.