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The CLO’s role in managing corporate culture
Understanding your corporate reputation risk
It seems almost every day a new corporate scandal is popping up in the headlines. Which is why having a strong culture is more critical than ever. But who in the organization is best positioned to lead the charge in driving a positive corporate culture? While it may not be the most obvious choice, chief legal officers could be in the best position to help lead corporate culture initiatives and manage any related reputational risks.
- Creating a positive corporate culture
- What is corporate culture?
- That’s not my job … or is it?
- Related topics
Creating a positive corporate culture
Today, the topic of culture is at the center of many business conversations—and for good reason. In an era of social media and 24-hour news cycles, and in the face of harassment claims and scandals, companies may face greater damage to their reputations than ever before. At the same time, a positive culture can provide value in weathering crisis events and, in some cases, preventing them. It can also be an asset in branding and attracting talent, among other things. Both the risks and benefits associated with corporate culture suggest that companies need to be proactive in addressing culture.
The chief legal officer (CLO) has significant responsibilities relating to culture and can play an important role in both securing the benefits of a positive culture and minimizing the reputational risks that can result from cultural challenges.
What is corporate culture?
Corporate culture is the sum of two parts: One, internal—what your board, executives, and employees say and believe about the company’s values and mission, and how their behavior and actions reflect those statements and beliefs; and two—how your customers, suppliers, investors, communities, and other stakeholders view your company.
The internal perspective can drive employee engagement and productivity. The external perspective can impact everything from reputation to investor decisions to talent and the recruiting.
That’s not my job… or is it?
You may be asking yourself whether culture and culture risk is the job of the CLO. There are arguments that can be made that responsibility rests with the chief executive officer, chief risk officer, chief human resources officer, or even the chief audit executive. Without a doubt, those executives, among others, generally play an important role. But it’s often the CLO who has the vantage point and objectivity to take the lead.
The role of the legal department gives the CLO access to both internal and external key stakeholders and every facet of the business, making the CLO well suited to lead a role in developing and managing a positive corporate culture and minimizing culture risk. Here are three considerations to help CLOs drive a positive corporate culture:
- Take the lead. While responsibility for culture falls on everyone from the CEO to the rank-and-file employee, the CLO can take a leading role in developing the strategy for company culture both internally and externally, tying culture into the company’s risk profile. At a minimum, the CLO can confirm that the appropriate governance and escalation procedures are in place, that there is a written code of conduct, and that all employees are properly trained to comply with the code of conduct.
- Don’t be the ostrich. One of the most important components of an organization’s culture is the actual behavior of its leaders and employees. For the best possible understanding of that behavior, CLOs must avoid burying their heads in the sand and, instead, fearlessly face their company culture cues by examining, understanding, and leveraging data.
- Practice makes perfect. Once the foundation has been laid for a strong culture, the CLO should plan for the eventuality of a crisis event, develop a crisis playbook, and provide assurances to executive management and the board around the organization’s preparedness. It’s important that a CLO not be complacent, even if the company has the very best culture and leading governance protocols in place, because it’s not a question of if a company will face a cultural threat—it’s a question of when?
As the business world we operate in grows simultaneously bigger and smaller with real-time information exchange, the business risks related to organizational culture grow, both internally and externally.
To successfully weather a crisis event, manage the day-to-day risks, and effectively leverage the company’s positive culture, a CLO is well positioned to take the lead on cultural baselines, understand and use data-related insights, and consistently practice crisis response. In these efforts, the CLO has an opportunity to lead in the alignment of culture risk profile and be a leader for executive management and the board.