Right now, in the increasingly volatile and chaotic world that organisations operate in, culture is struggling including in corporate boardrooms. Over the last 5 to 10 years, Environment, Social and Governance (ESG) and Diversity Equity Inclusion (DEI) have been important initiatives that went to the very heart of company cultures and the values they stood for. Progress in ESG and DEI has been slow and has needed a lot of regulatory, government, institutional investor and societal support to apply pressure to what often were stubbornly resistant executive teams and boards. While ESG and DEI have always been for me specific components of a company’s culture and commitment to do the right thing, over the last 18 months, ESG/DEI became over-hyped and got caught up in broader political and societal shifts.
The pendulum has now swung sharply in the other direction. 2025 rapidly become an annus horribilis for the ESG/DEI area. Trump 2.0 has precipitated quite a number of leading global corporations, primarily headquartered in the USA, to rollback and in many cases whole-heartedly abandon ESG and DEI initiatives. In some cases, this was heralded by the companies as a great success in that they had “achieved their objectives in the ESG/DEI area and it was now time to move on”. While there is some rationale for global corporations wanting to curry favour with the US President, the scale and speed at which these companies have abandoned ESG/DEI programmes is truly frightening. Amidst the gloom surrounding these announcements, one bright spot in recent weeks has been the growing cohort of companies and pension funds who have doubled down on their commitment to ESG and DEI.
It seems a lifetime ago that on August 19, 2018, the Business Roundtable of 181 CEOs, many of whom are the same CEOs who have recently abandoned ESG/DEI programmes, announced to great fanfare their commitment to move beyond shareholder primacy to lead their companies for the benefit of all stakeholders — customers, employees, suppliers, communities and shareholders. These recent seismic shifts in what are acceptable corporate norms, behaviours and values are now shining a bright light for all corporates on their culture, what “a company’s true north is” in terms of its behaviours, ethics, values and commitment to do the right thing.
The Board’s role in culture
In theory, the Board has a crucial role in setting the culture of the organisation and overseeing the performance of the CEO and executive team in embedding and bringing-to-life each day the culture, behaviours and values that represent the desired culture. In reality, quite a significant number of boards struggle to fully understand the true culture in an organisation and how it is experienced by employees and customers. A board chair recently shared with me the struggles he and his board have had with a dominant CEO who is very resistant to all efforts of the board to hold him accountable for the serious problems caused by a toxic culture which has taken root in the company over many years. While alarming levels of employee turnover and multiple harassment cases became the norm, the CEO adopted the position of “Once I am delivering on the financial numbers, what’s happening internally in the organisation is not the board’s concern. Nothing to see here, our culture is fine and these issues are just run-of-the-mill for any large organisation”. Progressive boards have taken a more proactive posture in recent years on their role in culture and setting the bar high for the executive team to excel in this area. Through active oversight of employee engagement, retention, customer satisfaction levels and feedback, boards can intelligently assess whether the actual experienced culture aligns with stated values. This has resulted in boards mandating meaningful employee surveys, insights into exit interviews, and whistleblower reports to understand the cultural issues that need attention.
The litmus test of organisational culture – how employees and customers are treated
Like any complex area, there can be a tendency to over-complicate organisational culture. In our board evaluation work, we ask each board director and executive a very simple question “How does this organisation treat its employees and customers?”. In our experience, the answer to this question tells you 90% of what you need to know about an organisation’s true culture that is lived and experienced day to day. Many board directors actually find this a hard question to answer and often say “I’m not quite sure, we regularly review the employee engagement and customer satisfaction data but unless there is an obvious red flag, we don’t probe deeper”. One of the characteristics of the best boards I see in action is an intelligent robust oversight of the executive team’s performance in the culture area, where the board set the bar high on an exceptional culture and through the Nominations/Governance/People/ESG Committee and the board itself, put in the hard yards to assure themselves that this is the actual lived and experienced culture. Some time back, I was incredibly impressed by the board of an insurance company I was evaluating. The afternoon before a board meeting, they were brought to a customer care centre and each board director spent the afternoon paired with a customer care agent listening in to the customers ringing in to make claims and, in some cases, complain about the approach of the insurance company to settling the claims. Over the course of the afternoon, each board director got to speak to both the agent they were paired with as well as engagement with a range of team members. The CEO championed this exercise as he felt it was extremely important for the board to see the real culture of the organisation.
The true colours of a CEO and Executive Team
In the overwhelming majority of corporate scandals, a toxic and value-destroying culture is inevitably present. While the title of the famous board governance book “The FISH ROTS from the HEAD” by Bob Garratt, correctly focuses on the board’s ultimate responsibility, in my experience, it is the CEO and executive team that ultimately drives the organisation off the cliff-edge. While a CEO and executive team will always be first and foremost judged by their performance, the CEO and executive team shape the organisational culture. In relation to ethics, values and behaviours , the CEO and executive team’s true colours are on display when it comes to the real culture in the organisation. There is a common denominator in the majority of organisational scandals of boards of directors either being blissfully un-aware of the destructive culture in the organisation or being fully complicit in accepting serious problems in the culture and behaviours in the organisation. Provided the financial performance remains satisfactory, these boards turned a blind-eye to an executive team out of control making, a mockery of the polished culture, mission and values statements on the walls of every office, annual report and website of the organisation.
Why do organisational scandals keep happening?
As we edge closer to the final report in the UK Post Office scandal, all who have watched the enquiry closely are absolutely dumbfounded as to the despicable treatment of the Postmasters and how an executive team could get so out of control in terms of the treatment of such a key stakeholder and their Machiavellian efforts to cover up their disgraceful behaviours. It simply beggars belief as to how such an experienced board of directors over so many years could fail so badly to do their job of intelligent robust oversight, common sense and un-covering the scandal themselves. When you look at the root causes of so many scandals over the last 20 years such as Barclays, Boohoo, Lloyds Bank, Uber UK and the Infected Blood scandal, there were often warning lights over several years of a toxic culture in the organisations that highlighted a board simply asleep at the wheel and failing in their fundamental duty to oversee the culture, behaviours and values in the company and to protect critical stakeholders such as employees, customers and patients. The catastrophic impacts of these scandals have highlighted the fundamental importance of boards adopting a servant leadership model where culture, ethics and values are at the very core of how the board operates and there is a balanced approach to the board acting in the best interests of shareholders, employees, customers and stakeholders.
Evolving the role of the Company Secretary in the culture area
One of the areas that the company secretary role has evolved in a progressive manner in recent years is their role as a key advisor on ethical leadership, compliance, and corporate integrity. As the vital bridge between the board and executive team, the company secretary is ideally positioned to work with the board chair and CEO to ensure high-quality reporting on culture, employee engagement, ethical concerns and governance issues. A company secretary shared with me recently that she initially faced resistance from the board chair and CEO to her expanding the focus on the culture, ethics and employee area but with strong allies in the Chief People Officer and the Remuneration People Committee, she was able to get support to increase the board time and focus on the people and culture area. A number of areas that the company secretary can help in the culture area are;
- Ensuring the culture area gets into the board/committee annual workplan and meeting agenda
- Advising the board on cultural risks and how company policies align with desired values to enable the board to assess the effectiveness of leadership in maintaining a strong corporate culture.
- Working with the HR leadership and executive team to provide brutally honest insights into employee engagement, retention and satisfaction levels, employee legal/tribunal cases, complaints around harassment, bullying etc.
- Ensuring that corporate values are reflected in the company’s policies, such as HR guidelines, code of conduct, whistleblowing policies, and diversity & inclusion initiatives.
- Maintaining a culture of compliance with legal, regulatory, and ethical standards.
- Overseeing whistleblowing frameworks to encourage employees to report misconduct without fear of retaliation.
- Organising board and executive team training on culture, ethical behaviour and regulatory responsibilities.
- Ensuring that board diversity policies and DEI initiatives are properly implemented.
I have seen some exceptional company secretaries who embody the highest levels of integrity and commitment to do the right thing and who have a great feel for the real culture in the organisation. Board chairs and CEOs who are serious about culture, need to empower and enable the company secretary to incorporate the critical culture area into their overall set of responsibilities.
Summary
The organisational culture equation has never been more complex and as the tectonic plates of disruptive societal and geo-political changes shift at an increasingly alarming pace around us, each board of directors has a critical responsibility entrusted to them to enable a progressive values-based ethical culture at the very core of their organisations. A hallmark of a great board of directors is that they combine excellence in oversight of traditional components of organisational performance with oversight of the executive team’s performance in bringing to life a modern ethical value-based culture where employees and customers are championed in a manner which delivers long-term sustainable success for shareholders and stakeholders. While organisational scandals and toxic cultures will always be with us, every board of directors has the opportunity to demonstrate the strong levels of leadership to ensure that the culture, mission and values statement in the annual report actually correspond to real-life and how employees and customers experience this culture day to day. Company secretaries have an incredibly important opportunity to support the board chair, CEO and remuneration/people committee to instil, oversee and nurture an exceptional culture that becomes embedded in the DNA of the organisation.
By Kieran Moynihan Managing Partner of Board Excellence - supporting boards and directors in the UK, Ireland and internationally excel in effectiveness, performance and corporate governance.