In the context of increasing pressure from investors, employees, customers, and other stakeholders on boards to assume a greater role in overseeing corporate culture in conjunction with their risk oversight function, and based on extensive research and director interviews, the timely "Identifying and Responding to a Dysfunctional Culture: Key Actions for Boards" from Marsh & McLennan & Women Corporate Directors suggests and elaborates on these sound inside- and outside-the-boardroom actions directors can consider to identify and respond to a dysfunctional corporate culture:
Inside the Boardroom
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Full board
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Consider culture issues in CEO selection
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Capture comprehensive range of information on corporate culture
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Ensure culture is a regularly scheduled board agenda item
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Comp Committee
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Ensure compensation structure supports desired culture & ethical behavior
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Consider how culture-related elements factor into executive compensation
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Audit Committee
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Review compliance updates
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Review whistleblower hotline reports
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Examine deep-dive data from employee surveys
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Nom/Gov Committee
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Consider culture in director selection & board diversity
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Review senior executive succession planning & process
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Outside the Boardroom (culture diagnostics)
- Explore cultural issues when onboarding
- Visit sites to better understand day-to-day operations
- Build relationships beyond C-suite to get honest feedback
- Review external feedback on the organization (e.g., social media)
- Apply experience and judgment to be attuned to culture "warning signs"
Corporate culture indicators that public company director NACD survey respondents identified as using over the past year include (from most to least common) whistleblower hotline reports, employee survey results, site visits, confidential discussions with leaders below the C-suite, exit interviews with executives, and external data sources.
See also Marsh & McLennan's release, and HR Dive's "Corporate boards step in to address dysfunctional cultures," and additional resources on our Corporate Culture page. This post first appeared in the weekly Society Alert!