Daily CSR
Daily CSR

Daily CSR

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A New Report Enlists Early Signs Of Weak Corporate Culture



03/17/2016

Weak corporate culture remains intangible till it translates into some tangible disaster, whereby learning from preceding corporate cases, a new report identifies a few signs which may warn the management to detect early signs of weak corporate culture.


Dailycsr.com – 16 March 2016 – The International Corporate Governance Network, in short the ICSA along with the Institute of Business Ethics has organised a “working group” which has enlisted a few “red flags” that point out “poor culture” in a corporate organisation.
 
The chain of “corporate scandals” taking place in Volkswagen, Tesco and Toshiba led to the need of a healthy corporate culture, whereby emphasising on its importance. Likewise, “recognising early warning signs of poor culture” and consequently dealing with them is not as “straightforward” as it appears.
 
Nevertheless, recently a report that has been published enlists “a number of qualitative indicators” which can be treated as “potential signs of a poor corporate culture”, such as:
  • High levels of corporate stress
  • Flawed remuneration policies
  • Complex legal structures
  • A tendency for takeovers to proliferate
  • Lax financial discipline
 
The said report comes as a conclusion of “a workshop of senior regulators, company directors and executives, and investors” which was organised by “International Corporate Governance Network” and “the Institute of Business Ethics”.
 
According to the findings of the workshop, short term targets imposed by the leaders, which the staff finds “difficult to meet”, cause major amount of corporate stress. Moreover, the said stress soon translates into a gap between the management and the staff, whereby it becomes difficult for the board to arrive at an “accurate picture” of the way the respective business was functioning.
 
Furthermore, the workshop also demonstrated that takeovers that are “poorly implemented” can create cultural multiplicity within the same working group, while in case of “complex legal structures”, the organisation may develop unseen pockets of “bad culture” which may go unnoticed by the board members.
 
Highlighting the “qualitative tell-tale signs” of weak corporate culture, the report also added a list of “indicators” that can be measured by the companies so as to detect the trend of bad corporate culture in its initial stages, whereby the list includes:
  • Staff turnover
  • Customer satisfaction
  • Health and safety records
  • Public commitment to values by leadership
  • Competition rules infringements
  • Regulatory sanctions
  • Qualified audit reports
  • Speak-up or whistleblowing statistics
 
While the report also noted that:
“...more attention should be paid to the role of human resource departments, which are often charged with the task of embedding culture, and to internal audit, which is well placed to detect when culture is slipping”.






References:
http://auditandrisk.org.uk/