Knowledge Center: Publication
How board governance and company culture intersect2/20/2014
Most directors today are accustomed to thinking about culture and its profound effect on business performance in the organizations they lead or have led. As sitting or former CEOs, divisional presidents, or functional heads, they have likely led culture change. But as independent directors of other companies, they may devote little, if any, time to understanding the cultures of the organizations they oversee and the impact — positive or negative — that culture has on company performance.
When urged to do so, they typically raise any of several objections, beginning with the fact that the day-to-day functioning of the culture is largely inaccessible to directors. Culture does not show up in the financial documents or other materials they review, and directors have only limited contact with the organization and its leaders. “How can you address what you cannot see?” they ask.
On the other hand, despite limited contact, some directors say that they have an instinctive grasp of the company’s culture and silently factor it into their thinking already. Still other directors believe that wading into culture, regardless of how accessible it is, might be seen as meddling, crossing the line between overseeing the enterprise and managing it.