“The way we do things round here”, is a phrase I hear often when talking about company culture. It isn’t perfect – it doesn’t take into account knowledge, beliefs, values and behaviours – words that usually accompany definitions of culture – but it’s a start.
The way we do things at the Financial Reporting Council (FRC) is central to who we are and what we do. Our chairman and executive directors sit with employees in an open plan office. Board members’ hot-desk when they are in for meetings. Employees are invited to speak with board members throughout the year. The executive team shares plans that will affect people and their work.
We regularly celebrate success. We reward those who demonstrate our citizenship values – not just about what you do, but how you do it. We engage employees in annual surveys – and act on the feedback. Teams host ‘lunch and learn’ sessions about their work. We welcome innovation and new approaches to our work. We expect to be challenged and for concerns to be raised. And, we have baskets of fruit in the staff kitchen each morning.
None of these on their own leads to a healthy culture, but I firmly believe they provide an environment where openness, transparency and good communication can thrive. This provides the FRC with the foundation to fulfil our mission ‘to promote high-quality corporate governance and reporting to foster investment’.
We believe in the role which codes, standards and regulations have in setting expectations of behaviour and performance among companies, investors, actuaries and auditors. We also believe in the value of a business-led approach to tackling the continuing challenge of corporate behaviour which leads to low levels of trust in business. We believe that if a company focuses on the long-term needs of their investors, the UK economy will continue to prosper.
Codes put forward principles for good practice that make inappropriate behaviour less likely to occur; and public reporting can make it harder to conceal such behaviour. But that does not prevent inappropriate strategies or decisions being made. Only people within the business can do this and how they are incentivised plays an important part.
This is why last year the FRC committed to developing a ‘culture coalition’. We wish to encourage boards and companies to learn from each other’s experiences and good practice when addressing company culture. The project will also deliver some observations from the wide engagement we and our project partners have undertaken.
We have had an overwhelmingly positive response to our invitation to participate in this project. Internal and external auditors, risk, ethics and HR professionals, company secretaries, board evaluators, lawyers, not-for-profits, company executives and non-executive directors and membership bodies have all come forward. All with the aim of helping boards support their companies to shape, set and embed a culture that is in line with the purpose, values and strategy of the organisation, and with society’s expectations of a company.
The range of participants really brings home to me that the culture of a company isn’t just the responsibility of the board, or the executive management, investors, HR, employees or the government. Everyone has a role to play in supporting business to rebuild trust and prevent future cultural failings if we are to be successful.
Stephen Haddrill became Chief Executive Officer of the Financial Reporting Council in November 2009.
The culture coalition is being lead by the FRC, in partnership with the Chartered Institute of Management Accountants (CIMA), the City Values Forum, the Chartered Institute of Personnel and Development (CIPD), the Institute of Business Ethics (IBE) and the Chartered Institute of Internal Auditors (IIA).