Today, SSGA President & CEO Cyrus Taraporevala reportedly (also here) sent this letter (which is posted on SSGA's website) and accompanying "Aligning Corporate Culture with Long-Term Strategy" framework to the independent chairs or lead directors of more than 1,100 companies in the S&P 500, FTSE 350 and equivalent indices in Australia, France, Germany, and Japan, to help boards and senior management align their corporate culture and long-term strategy. SSGA notes that - given its impact on a company's long-term performance - it intends to prioritize corporate culture in its 2019 engagements.
The suggested 3-phase framework entails senior management (with board oversight): (i) conducting a comparative (or gap) analysis to assess the alignment of the corporate culture and long-term strategy, (ii) implementing mechanisms to impact and monitor the corporate culture, and (iii) reporting on (or otherwise communicating) the board's role in influencing and monitoring the company's culture. Illustrative examples associated with the implementation phase include monitoring factors such as employee turnover, retention rates, employee satisfaction survey results, diversity & inclusion dimensions, and pay differences among employees across divisions and job functions.
In addition to the framework itself, SSGA's paper addresses the basis for and expected scope of board oversight; includes examples of corporate culture-related "best practices"; and shares these engagement expectations:
Engaging on Corporate Culture. When engaging with directors and management on corporate culture, we seek to understand the following:
- Can the director(s) articulate the current corporate culture?
- What does the board value about the current culture? What does it see as strengths? How can the corporate culture improve?
- How is senior management influencing or effecting change in the corporate culture?
- How is the board monitoring the progress?
Importantly, the framework and examples are characterized as illustrative rather than prescriptive - aimed at helping boards "develop their own approach to incorporating culture into long-term strategy."