The boardroom’s role in channelling corporate behaviour

The Boardroom plays a critical role in channelling corporate behaviour. Boardrooms not only play an initiating role in defining corporate culture, but are key players in implementation. A new report by ACCA (the Association of Chartered Certified Accountants) and the Economic and Social Research Council (ESRC), reveals that CFO’s perceive corporate mismanagement to be a result of poor implementation from the board.

ACCA’s head of corporate governance and risk management Paul Moxey stated:
“An organisation can have the most sophisticated code of governance and rules, but as recent high profile scandals have shown, poor organisational culture, stemming from the board, has been a significant cause of corporate wrong doing. To design a system that works, we believe it is important to ask the right questions – especially what kind of culture do you want?”

The report, Culture and Channelling Corporate Behaviour, is based on a series of roundtable discussions and survey of ACCA members. It advises that when assessing their organisation’s culture, boards should ask themselves three fundamental questions, which are seen as basic good corporate governance:
What are the goals and purposes of the organisation?
What sort of behaviours does is wish to encourage and discourage?
How is the tone at the top set out and conveyed through the organisation?

The report lists a number of adjustments that need to be balanced by the boardroom and by staff, such as; is there openness to mistakes, or zero tolerance? Is the organisation innovative, or controlled? Does profit rule, or public value matter more? Seven points for consideration by the board are also listed, serving as a starting point for assessment and possible change.

ACCA’s researcher Pauline Schu explains: “Assessing culture can be difficult because it calls upon a new set skillset and requires a multidisciplinary approach. We hope this report will help boardrooms avoid some of the potential pitfalls and help them on their journey towards evaluating and improving the culture within their organisation.”

Healthy corporate culture is a prerequisite for good governance and risk management. It is also essential for good long-term corporate performance. Good corporate governance is about achieving long-term sustainable value creation while taking proper account of shareholders and other stakeholders’ interests. Taking ‘proper account of’ means behaving ethically at all times; over the last ten years ACCA has published several reports which major on business ethics and of course professional ethics is at the heart of the ACCA qualification.

Considering the human factor in boardrooms, is central to understanding how they function. A firm can have what appears to be most sophisticated procedures and follow a code of governance; its success relies on the people within the boardroom. People can make perfectly designed and executed systems fail but, equally, they can make poorly designed systems work actually rather well.

The Culture and Channelling Behaviour report can be found at www.accaglobal.com/culture

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