Culture is on the (board) table and can’t be ignored

Directors are being challenged to take more of a role in shaping the culture of their organisations, as regulators take a greater interest in what causes poor corporate behaviour and corruption.

The importance of organisational culture and how directors need to respond will be covered in the AICD’s annual Essential Director Update, presented by Alan Cameron AO FAICD, who is chairman of Property Exchange Australia Limited as well as a number of other boards. Cameron is also a member of the AICD Corporate Governance Committee.

“Culture underlies a whole lot of the issues that corporate Australia and Australian directors face, from the approach to staff relations all the way through to overseas or domestic corruption,” he says.

More importantly, says Cameron, both the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investment Commission (ASIC) are “very interested” in what directors are doing about culture.

“You’d expect APRA, with its prudential focus, to have an interest in good culture but ASIC has been asserting it too. ASIC points to the provisions of the criminal code that make corporate culture relevant to an assessment of whether a company has broken the law,” says Cameron.

Earlier this year, ASIC Chairman Greg Medcraft made headlines when he connected the dots between poor corporate culture and poor outcomes for consumers.

“We encourage boards and management to think about the three Cs of good conduct: communicating from the top on what is expected; challenging whether the culture is achieving the outcome desired; and complacency, that is, do not be complacent. Conduct should be continually reviewed, enforced and validated,” he wrote in the Australian Financial Review.

No board should believe it doesn’t have a role when it comes to corporate culture, says Cameron. “The message that you send by your own behaviour, apart from anything else, is all part of culture. Directors need to understand the culture within the company, or the company will face added risks.”

In other issues to be explored during the presentation, Cameron will consider the board’s role in the organisation’s IT strategy including its approach to cyber risks; diversity; remuneration; corporate governance; and the “major debate” about whether independent directors should be mandated on super funds.

He’ll also cover some of the major cases from the past 12 months including the “very important” penalty decision involving Australian Property Custodian Holdings directors as well as recent insider trading cases and several cases relating to directors’ insurance cover.

The Federal Government’s Capability Review into ASIC will also come under the spotlight with Cameron explaining what it may mean for directors.

The Essential Director Update is a complimentary event for AICD members, held in all capital cities and 11 regional centres around Australia during September and October 2015.