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New Study of Corporate Board Members from Major Companies Says Building Ethical Culture is a Business Imperative

New Study of Corporate Board Members from Major Companies Says Building Ethical Culture is a Business Imperative

LRN Corporation and Tapestry Networks uncover key themes to elevate ethics in new report, “Activating Culture and Ethics from the Boardroom”

LRN Corporation, the leader in ethics and compliance solutions for companies worldwide, announced the results of a research study developed in partnership with Tapestry Networks, a professional services firm focused on boards’ key roles in corporate governance, as a part of their joint Ethics, Culture and Compliance Forum initiative (ECCF). The ECCF convened by Tapestry Networks with the support of LRN, brings together directors and executives to explore the role of values, corporate culture, and ethical decision making in securing a long-term future for businesses.

Activating Culture and Ethics from The Boardroom represents insights gleaned from in-depth interviews of 40 directors occupying 80 seats on public company boards with a combined market cap in excess of $4.8 trillion dollars and business operations on six continents. Among those participating in the study are board members from Cigna, Coca-Cola, Colgate, Goodyear, John Deere, Entergy, HP, Kaiser Foundation, McKesson, Motorola, Union Pacific, United Airlines, Verizon, Walt Disney, Wells Fargo and Weyerhaeuser. Notably, 25% of contributors to the study were directors who are also current or former chief ethics and compliance officers.

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Captured in this first-of-its-kind report is the unique voice of the board on shaping ethical corporate cultures. This is important in an era where attention to stakeholders is a priority and where culture is understood as a key driver of business performance; why a company exists and how a company operates is as important as what it does. In-depth interviews reveal four key themes.

FOUR KEY THEMES

  1. Measurement. Directors fear they are not well-positioned to “read” corporate culture, which they find to be inherently challenging to interpret. Said one study participant, “There are barometers you can read and statistics you can see, but I’m not sure you can measure culture without [also] feeling it.” There is, however, increasing evidence that the underlying drivers of ethical culture can and are being measured and boards need to insist management is doing so.
  2. Oversight. Boards wrestle with the most effective oversight structures. Directors agree that culture, ethics, and compliance demand significant time and effort, but recognize that they sometimes struggle to give these issues due attention on crowded board and committee agendas. “There is nothing more important than giving the board enough time to address culture,” said one study participant.
  3. Accountability. Boards are responsible for ensuring that executives shape culture and compliance. All agree this is non-negotiable, but approaches differ. “Boards have no reservations about holding top executives responsible for business performance, but they also need to be held accountable for the culture they’re establishing,” said a study participant. Demographic makeup of the board can also impact how culture is prioritized.
  4. Trust. It is crucial and yet can be difficult to maintain. Trust is a key enabler of transparency; it is indispensable to a board’s ability to oversee culture. Deeper forces like trust, fear, and organizational justice can be measured but frequently are not.  Leaders that fail to prioritize, model, and maintain trust throughout the organization and with the board are at risk – as is the performance of the companies they lead.

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“Ethics and compliance leaders have always known that boards are pivotal in helping companies do the right thing,” says David Greenberg, special advisor for LRN. “But the director perspective is not always fully understood or made actionable in what E&C does. This study uniquely surfaces board sentiment at a critical time for global business and paints a path forward for E&C to build a stronger, more effective relationship with boards in their common pursuit of ethical corporate cultures. We look forward to collaborating with Tapestry Networks to make the insights from the study actionable for the E&C community.”

“Diving deep on ethics and compliance starts with activating culture,” said Marsha Ershaghi Hames, partner at Tapestry Networks. “Developing the Ethics, Culture and Compliance Forum revealed how critical it was for sitting public company directors and chief ethics and compliance officers to engage directly on critical topics. The dialogue has brought visibility to the pragmatic dimensions of boards shaping culture. While LRN has long championed the value of building ethical corporate cultures, the collaboration with Tapestry has forged a path towards identifying practical approaches for effective oversight.”

Chatham House Rule guided conversations with board members, which permits use of the information received but without direct attribution of the speakers. Demographic representation of participants was nearly evenly split by gender: men (45%) and women (55%), with 30% identified as non- white. More than 25 industries were represented including retail, banking, finance, pharmaceuticals, insurance, manufacturing, and entertainment.

An invitation-only summit with study contributors to discuss the findings will be hosted in July 2021. Board members and corporate leaders are also invited to listen to a series of 1:1 discussions about board participation in advancing ethical culture, hosted by David Greenberg, on the Principled Podcast by LRN

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