The significant focus on company boards to step up their oversight of company culture has been unhelpful, so far, in providing practical guidance on how these enhanced expectations should be met. Company boards trying to respond have been left floundering. So, a recent initiative in the UK by the UK’s Financial Reporting Council (FRC) is both timely and welcome.
The FRC sets the standards framework within which auditors, actuaries and accountants operate in the UK. It also sponsors the UK Corporate Governance Code (for companies) and the Stewardship Code (for investors). The FRC monitors the implementation of these standards and promotes best practice of companies and professionals by issuing guidance and publishing thought leadership papers.
The FRC has launched a market-led initiative to gather practical insight into corporate culture and the role of boards; to understand how boards can shape, embed and assess culture; and to identify and promote best practice. Having had initial discussions with stakeholder groups and a roundtable with FTSE-100 Chairs, four workstreams have been identified and the FRC has issued an invitation to contribute views to one or more of the workstreams.
The four areas are:
- Delivering ‘Sustainable Success’ – the role of the effective board
- People issues – aligning culture, values, human resource practices and performance reward systems
- Stakeholder issues – relationships between culture and business models, with shareholders, customers and suppliers and the impact on the wider community and environment
- Embedding and assurance – measuring and monitoring culture, the role of internal audit, risk management and public reporting of cultural indicators
The FRC plans, in due course (i.e. timing unknown), to publish a report of the observations gathered, identify best practice and develop practical, market-led resources to help boards across a broad range of sectors and industries take effective action on culture. The FRC Guidance on Board Effectiveness will also be replaced with new material that has culture at the forefront.
Further details can be found HERE.
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