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Perspectives
Board oversight of culture
Board Practices Quarterly, July 2024
By Natalie Cooper, Bob Lamm, and Randi Val Morrison
Corporate culture is a critical area of board oversight. Closely tethered to corporate strategy and risk, culture failures can upend a company. On the flip side, the benefits associated with a positive culture are mission critical and can include business and financial resilience, reputation and goodwill, reduced employee misconduct, and higher employee engagement and productivity. Many employees, investors, regulators, and other stakeholders are increasingly focused on workplace culture in their respective employment, stewardship, enforcement, and engagement decision-making practices. Accordingly, boards of directors should consider whether the practices and processes in place allow them to effectively monitor, influence, reinforce, and participate in, shaping company culture.
This Board Practices Quarterly looks at how boards oversee corporate culture. It presents findings from a survey of members of the Society for Corporate Governance that included questions pertaining to the board’s role in approving the company definition for culture; where primary oversight of culture resides; information being reported to the board—and how often and by whom; and shareholder engagement.
Highlights of survey findings
Respondents, primarily corporate secretaries, in-house counsel, and other in-house governance professionals, represent 77 public companies of varying sizes and industries1, and the findings pertain to these companies. The actual number of responses for each question is provided. Some survey results may not sum to 100% as questions may have allowed respondents to select multiple answers. Where applicable, commentary has been included to highlight differences among respondent demographics and to highlight comparisons to findings in the 2018 Board Practices Report.
Does your full board or a board committee review or approve your company’s definition of corporate culture? [Select all that apply] (74 responses)
What information does your board/responsible committee receive to monitor and evaluate company culture and behavior? [Select all that apply] (57 responses)
The greatest differences between market caps pertained to:
- Attrition and turnover rates – 70% large-caps; 43% mid-caps
- Incentive programs and impact on encouraging expected behaviors and values – 17% large-caps; 40% mid-caps
- Pulse survey results on ethics and compliance programs – 52% large-caps; 27% mid-caps
- Peer benchmarking data on ethics and compliance programs – 43% large-caps; 13% mid-caps
- Training and communications provided to employees – 35% large-caps; 10% mid-caps
- Policies and reports related to DEI – 70% large-caps; 53% mid-caps
Results from a similar question in the 2018 Board Practices Report revealed the most common information as hotline reports (78%), findings from investigations (68%), and results from culture surveys (58%).
Endnote
1 Public company respondent market capitalization as of December 2023: 44% large-cap (which includes mega- and large-cap) (> $10 billion); 51% mid-cap ($2 billion to $10 billion); and 5% small-cap (which includes small-, micro-, and nano-cap) (< $2 billion). Respondent industry breakdown: 31% energy, resources, and industrials; 27% financial services; 19% consumer; 18% technology, media, and telecommunications; and 4% life sciences and health care.
Small-cap and private company findings have been omitted from this report and the accompanying demographics report due to limited respondent population.
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Carey Oven
Center for Board Effectiveness | Deloitte & Touche LLP
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