Today, as we celebrate International Women’s Day, we remember: The hurdles for companies to prove their strong corporate culture to financial industry regulators are rising. On the article, Fiona Hathorn, CEO and co-founder of WB Directors, said: We explore the role, benefits and challenges of culture audits, as well as best practice advice on how to conduct a culture audit.
Businessman Peter Drucker’s famous quote, “Culture eats strategy for breakfast,” has taken on new poignancy in recent years.
Of course, he didn’t mean that strategy wasn’t important. Rather, it was that a strong and empowering culture was the path to organizational success. However, culture has always been a difficult concept, and although it is widely acknowledged to be important, it is difficult to define. An intangible asset that few people have attempted to formally measure. until now.
The FRC (Financial Reporting Council) has introduced the 2024 Code, which applies to financial years starting on or after 1 January 2025, with first reporting in 2026. A key principle of the new code is the move towards ‘outcomes-based reporting’. This aims to provide stakeholders with information about how board decisions have and will impact the company’s strategy, objectives and long-term viability. means. The Code also further increases board responsibility for culture by requiring boards to not only assess and monitor the company’s culture, but also to focus on how the desired culture is embedded. Masu.
These changes reflect the evolving role of corporate boards. For decades, it appears that the board’s duty has been above all to protect financial assets and maximize profit growth. Over the past decade or so, ‘governance’ has taken center stage, with factors such as board composition, executive remuneration, appropriate risk management, and financial health emerging on the agenda. These days, “environment” dominates the corporate environment, generating huge investments and strict regulations. A new era for boardrooms where culture is elevated as top business, amid current headlines highlighting the effects of unhealthy organizational cultures, including culture-related scandals and devastating damage to talent, reputation, and value. We see it coming. priority.
Culture is not a cure
I strongly support these changes and would like to see similar requirements extend beyond the financial sector. We recently asked members of the UK Women’s Network, who serve on boards across all sectors, how they felt their boards were committed to people and culture. An overwhelming majority (82%) say people and culture are “top-level” or “important” areas for boards. Despite this, 40% say discussions around the quality of people and culture are “weak” compared to other topics, and only a few board members surveyed are leveraging their HR expertise. Only 27% said yes.
Perhaps a lack of talent and cultural expertise in the boardroom could be a symptom of a larger problem. It’s that many people still only see culture as something to address when a company is in trouble. For example, the majority of companies now only bring in auditors in the event of a crisis, but corporate culture is not something that can be fixed, and certainly not quickly. A positive culture is the result of implementing new processes, structures, training, and policies to tackle tough business challenges, such as rethinking outdated strategies or investing in future leaders. As we do important work, a strong and healthy culture evolves.
diversity is important
Diversity is important in the context of culture. People with diverse backgrounds and diverse perspectives generate greater voices and ideas, which in turn stimulates creativity and innovation. Additionally, an inclusive work environment allows
We help people feel empowered and valued by bringing their authentic selves to work. Developing an employer brand to attract and retain talent and accelerating innovation are surefire tangible signs of a positive company culture.
As organizations around the world commemorate International Women’s Day, it’s worth reflecting on this year’s theme, which calls for ‘investing in women’ to ‘accelerate progress’. When it comes to tackling gender diversity, three successive government-backed schemes will increase the proportion of women in board roles across FTSE 350 companies from 9.5% in 2011 to 2023. In , she rose to 40.2%. World Bank directors have been measuring gender diversity across FTSE 350 companies. Companies below the top 350 listed companies also share the same, and the figure has improved from 48% of companies that failed to achieve the target of 33% female board members in 2021 to 16% in 2023.
While this is a positive development, it is worth noting that the FTSE Women Leaders Review has set a target of 40% female representation. Furthermore, they and the Financial Conduct Authority have outlined that one of the four most influential roles should be held by a woman: CEO, CFO, SID and Chair. 19% of the FTSE 100 have not achieved these targets, 36% of the FTSE 250, 41% of the FTSE All-Share ex350 and 73% of Alternative Investment Market (AIM) listed companies have yet to achieve these targets. not.
When considering diversity beyond gender, we recently analyzed more than 1,000 publicly traded companies and found that out of approximately 4,800 board seats, only one person held a position other than CEO, CFO, or company secretary. It was found that only 81 (2.3%) officers were present. There are only three People’s Officers in this small group.
In the face of increased cultural scrutiny, boards must actively consider the information and data that drive the discussion. Regular culture audits are one way to build this into board cycles, but close collaboration with culture leaders and executives with cultural expertise to drive measurable actions. It is not a replacement. The importance of a consistent and ongoing focus on culture, rather than waiting for a crisis, cannot be underestimated.
Invest in your employees today, start establishing and instilling purpose and values, turn your back on bad behavior, and put diversity, equity, and inclusion at the center of your business strategy. A healthy company culture endures, withstands times of stress and change, and leads to long-term success.