Five Questions Board of Directors Should Be Asking About Culture
/The ongoing saga of Activision Blizzard presents some opportunities for all of us to look at how we might improve our corporate cultures. Embattled Activision Blizzard CEO Bobby Kotick has announced that he would leave the company “with speed” if he can’t fix its culture of misconduct.
Unfortunately, culture can’t be fixed with speed.
It is not as simple as just telling people to stop behaving badly. Culture isn’t stagnant. Rather it’s fluid and requires consistent care and feeding.
No CEO alone can fix the culture either.
It requires action from the Board as well as executive management to set the ethical tone from the top. Ethical culture just as much as the corporate strategy should be a top priority and agenda item of the Board because one cannot be accomplished without the other.
Further, as the so-called Great Resignation illustrates, if the statement is a threat, it is unlikely to have much effect as workers are leaving toxic workplaces in droves.
Bad corporate cultures create innumerable problems. Reward systems that promote and glorify misbehavior and punish those that raise concerns should be troubling to everyone involved.
Hallmarks of this type of culture frequently include Human Resources departments with high turnover, untrained staff, and a lack of uniform and consistent processes.
Just as it takes years to build a culture, unraveling it will take time, dedication, and a razor focus from the Board of Directors that holds management accountable.
Questions that any Board should be asking about the culture.
Ethical Culture Survey
When was the last time the company conducted an ethical culture survey and what were the results?
Whether part of a larger employee engagement survey or not, the Board needs to know what questions are being asked to determine whether employees believe that there is organizational justice.
Having organizational justice at the core of the organization is key to conducting business with integrity. The concept of organizational justice is not only about equal pay for equal work but includes procedural justice which requires consistent processes for handling concerns that are fairly administered.
Being accountable to act on the results goes hand and glove with fostering an ethical culture, so what actions were taken as a result of the survey?
Misconduct Concerns
The Board has to do more than scratch the surface here.
What types of misconduct are occurring across all areas of the company?
From this question, the Board needs to go further to ask what is the root cause? It’s unlikely that every case of misconduct is the result of a rogue or bad apple.
Trends in misconduct can point to toxic managers, ineffective policies and procedures, or incentive and performance systems that encourage misconduct.
The Board should ask for a consolidated dashboard that highlights misconduct risks across the organization including retaliation. The Board needs to understand the risks, the causes, and how misconduct is mitigated.
Misconduct Escalation Protocol
As with risk appetite, the Board should spend time every year or two discussing what is the escalation protocol so every Director knows what issues will be raised to them and what their roles and responsibilities are when this happens. Critical to this protocol is how will misconduct by a Director be handled.
Part and parcel of this is the investigation protocol for how all concerns are handled regardless of which department has responsibility for resolving the concerns. The Board should ask for a copy of this protocol as well.
Compliance vs. Ethics
It isn’t just about following the law.
An effective Ethics and Compliance Program equips everyone to make the best ethical decision and gives them avenues to raise concerns.
If the Board isn’t sending the executive leadership team the message that ethical behavior is expected, then they can’t be surprised that the management team also isn’t sending the message to their staff.
When designing the strategy or making decisions, just asking if consideration to all stakeholders has been taken into account or if it is the right thing to do, sends this message.
In performance conversations, the Directors should ask executive leadership what they have done to support an ethical culture.
Face to Face
Do the Directors know who the Chief Ethics and Compliance Officer is?
Was he or she interviewed by a Director or Board Committee before they were hired?
Are they granted direct access to the Board?
How many other hats do they wear?
Do they regularly report to the Board?
Can they be fired without the approval of the Board?
If the answer to any of these questions is no, then the Board has not provided the necessary support for the Ethics and Compliance function to be independent and the Board should work on changing this.
With the last Board meetings of the year upon us, Boards and their executive management teams can take steps now to improve the ethical culture of their organization by asking and acting on these questions.
