Oversight of corporate culture

Board and committee effectiveness, Board risk oversight, Working with the internal and external auditor

Audit Committee Leadership Network, December 2019

Companies are under pressure to root out bad behavior and promote positive cultures to enhance long-term value. Executives set the tone at the top, but increasingly directors are expected to understand, monitor, and influence company culture too. It can be difficult, though, for non-executive directors to meet this expectation, as they lack regular exposure to the workplace. Boards are eager to enhance the ways they oversee this emerging governance priority. On November 1, 2019, members of the Audit Committee Leadership Network (ACLN) met in New York to discuss oversight of corporate culture. They were joined by Angela Travagline, senior director, audit and assurance, at GlaxoSmithKline (GSK), who runs an innovative culture audit program, and by Micah Alpern, a partner/principal in EY’s people advisory services and Americas Culture Leader.

Executive summary:

  • Key stakeholders are focusing on corporate culture
    In recent years, major institutional investors and corporate governance policymakers have been focusing on corporate culture, in part to create and preserve long-term value. While acknowledging that management is responsible for corporate culture, they are looking to boards to better understand, monitor, and even influence culture.
  • Companies employ a variety of methods to assess and influence culture
    Ms. Travagline described GSK’s culture audit program, which is embedded in the corporate audit group and conducts regular assessments of key business units. These assessments include a mix of both information reviews and in-person interviews. ACLN members considered ways to assess and influence culture at their own companies. Culture audits and new approaches to old assessment tools like surveys can yield positive results.
  • Board oversight of culture
    Most audit committees do not have a defined role in overseeing culture, although many audit committee chairs said they provide some form of culture oversight. Committees dedicated to ethics and culture provide an alternative, though they are still uncommon. Wherever culture oversight resides, members stressed that it is incumbent upon the board to look for management to maintain a positive culture throughout the company by being visibly aware, committed, and thorough in aligning behaviors with values.