The board sets the tone for ethical and responsible decision-making throughout the organisation.
The culture of an organisation could be thought of as its “personality”. It is represented by shared values, norms, practices and core beliefs that shape behaviour. Organisational culture is sometimes described as “how we do things around here”.
The culture of an organisation therefore influences what it does, its relationships with stakeholders and its reputation. It can also be an important determinant of whether the organisation is able to achieve its strategic objectives and deliver on its purpose.
While culture can be a complex and elusive thing to identify and improve, it can have
a direct impact on the activities and success of an organisation. For example, through the effect it has on the level of staff morale, absenteeism, the ability to attract or retain staff, the level of “wastefulness”, the level of risk-taking (including reputational risk) and the potential exposure of the organisation to legal or regulatory action.
A board and its individual members have a leading role to play in promoting a healthy culture for the organisation they serve. Clearly the chair has a leadership role in this context to set the standard for others to follow in terms of culture. Some would go as far as to say that boards can ill afford to ignore cultural considerations because, whether through conscious actions or otherwise, the culture and ethos of an organisation will be heavily influenced by what happens at the board level.
Recognising the relationship between culture and strategy, many boards take a conscious and active role, both at a board and an organisation-wide level, in promoting the culture and behaviours necessary to deliver on purpose.
It is widely recognised that the culture of an organisation will be influenced by the conduct and actions of the board and individual directors. To repeat an ancient Chinese saying, “the fish rots from the head”.
Some organisations set out elements of expected conduct and ethical standards in “codes of conduct”. One area of particular focus has been to put in place arrangements aimed at having potential conflicts of interest dealt with appropriately, including policies and procedures concerning the identification, declaration and management of conflicts.
Every decision made by a board must be impartial and in the best interests of the organisation. If a particular decision is likely to benefit a director in some way, or benefit someone close to a director, that director is no longer in a position to make an impartial decision; he or she has a conflict of interest.
Generally speaking, the principles of managing conflicts are fairly clear: if a conflict has been identified, it must be disclosed and from the moment it is disclosed, that director is no longer invited to exercise judgement on how it should be resolved. The other members of the board should then decide the best course of action. The director with the conflict may be excluded from any further discussion or be allowed to be present, but not permitted to vote. The board may also tailor the papers provided so that the conflicted director receives no information on the issue.
Having clear codes around potential conflicts and other conduct and ethical standards sends a message to the organisation and all those who have dealings with it that the board
is committed to upholding certain standards, and is transparent about what it believes
is appropriate behaviour.
Many desired behaviours that promote a healthy culture in the boardroom are often unwritten, such as:
- Arriving at board meetings on time and staying until the meetings end
- Reading board materials in advance of meetings
- Not talking over others or monopolising board discussions
- Giving each board member the opportunity to speak
- The asking of questions not being discouraged or frowned upon
- Board issues being dealt with in the boardroom and not “in the lift lobby” or externally
A well-functioning board will necessarily entail a high-level collegiality and mutual respect, but at the same time recognise the need for constructive discussion and debate where appropriate.
Questions for consideration
- Has the board developed a code of conduct and agreed set of values and behaviours to guide board members?
- How does the board hold itself accountable for compliance with
the formal code of conduct and ethical standards?
- Does the board hold itself accountable to its own code of conduct?
- Does the chair proactively lead board culture and ensure the active engagement of all directors?
- Does the chair have the confidence of key stakeholders?
- Is there a formal policy relating to the declaration and handling of conflicts of interest?
The board can take steps to influence organisational culture to enable it to more effectively implement its strategies and deliver on its purpose. This might include examining existing culture and how this differs from desired culture, then prioritising any desired changes and putting in place an action plan to bring these changes about.
Implementing cultural changes is not usually a simple or straightforward process. It can involve the re moulding of values, beliefs and behaviour, and necessitate a considerable time commitment, particularly from management and staff.
Measures that organisations might use to help influence culture include:
- Encouraging and facilitating open conversations on the values of the organisation
- Developing or adapting a formal code of conduct and ethical standards
- Challenging undesirable practice and behaviour
- Undertaking team-building exercises
- Training and support
- Reviewing hiring and firing practices
- Changing how success is rewarded/celebrated
Some questions for consideration
- Does the organisation have a formal code of conduct and ethical standards?
- How does the board hold management accountable for compliance with the formal code of conduct and ethical standards?
- To what extent has the board considered “the way things are done”, in terms of potential impact on the ability of the organisation to execute its strategies and deliver on its purpose?
 Refer to Bob Garratt, The Fish Rots From The Head: The Crisis in our Boardrooms: Developing the Crucial Skills of the Competent Director, Profile Books, 2nd edition, 2003.
Download the full Good Governance Principles and Guidelines for Not-for-Profit Organisations as a PDF.