A third of boards fail to drive corporate culture, new research finds
Nearly a third of boards across the public and private sectors are failing to drive culture in their organisations, according to new research by the Chartered Institute of Internal Auditors.
Based on a survey of 220 heads of internal audit, the findings show 31% of boards have not established or articulated what sort of corporate culture they want and only 36% assess the extent to which values are manifested in the behaviour of all staff within the organisation.
However, boards are slowly starting to pay more attention to the issue of culture. Nearly 20% of survey respondents plan to include cultural aspects in their audit work in the coming year, although more than a quarter has no plans to audit culture in the next 12 months.
The Institute’s report makes a number of recommendations, including that all boards should:
- Articulate their expectations around values and behaviours and seek assurance that staff at all levels are living them.
- Review, in discussion with the head of internal audit, the extent to which available data and technology are used to gain assurance on culture, in addition to traditional surveys and observations.
- Embed a ‘just’ culture, which promotes an atmosphere of trust and encourages ‘speaking up’ whilst at the same time setting clear benchmarks for acceptable behaviour.
Dr Ian Peters, chief executive of the Chartered Institute for Internal Auditors, said: “Managing culture is a vital issue for Boards, to ensure not only that they are setting the right tone at the top, but that all employees are acting in accordance with the organisation’s ethics and values.
“Auditing culture is not an exact science. Many organisations struggle to define their culture, let alone incorporate it effectively into their risk evaluation and assurance processes. But it is essential that they do so.”
Peters says that whilst the financial services industry is ahead of the game in this respect, all other sectors need to follow suit.
“As we have seen recently in the automotive and retail sectors, scandals can hit any industry, and whatever other factors come into play, culture always plays a significant role in the issue.”
The Institute’s research is part of the UK’s Financial Reporting Council’s (FRC’s) ‘Culture Coalition’ initiative, a collaboration with CIMA, the City Values Forum, IBE, IIA and CIPD.
The FRC published a report earlier this week exploring the importance of culture to long-term value and how corporate cultures are being defined, embedded and monitored.
Among the FRC report’s recommendations was the need for the values of the company to inform the behaviours which are expected of all employees and suppliers. Human resources, internal audit, ethics, compliance and risk functions should be empowered and resourced to embed values and assess culture effectively, the FRC said, and their voice in the boardroom should be strengthened.
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