Click here to download a pdf - Director Magazine

More documents

Recommendations

Info

THE BOARD’S ROLE IN ESTABLISHING THE RIGHT CORPORATE CULTUREsystem, it is clear that many post-mortems into corporate governance are fixatedby board structures, remuneration policies and risk management systems. Theydo not focus in any meaningful way on the behaviour of human beings, per se.It is baffling that boards, government and regulators seem to ignore thepowerful tools now available to measure and change human character,judgement and behaviour. Even bus drivers are routinely given personality teststo measure whether or not they can exercise self-control in stressful drivingconditions. So why not also test directors and senior managers to understandtheir character and decision-making skills?Results from a well-established integrity test, the ‘MoralDNA’ profile*,clearly demonstrate how and why failures in character and judgement lead tohigh-risk behaviours. The bar chart opposite measures the ethics in life and atwork for over 1,000 directors and senior business executives, in corporationswith a combined market capital in excess of £200bn, who have taken the test. Itshows how their preference for making decisions based on the ethic of obedienceincreases when they go to work. On the face of it, this might be considered a goodthing. However, the research also shows that their ethic of care is suppressed atwork. The combined effect of both of these phenomena is actually to increasebehavioural risk. If people become more compliant, they also become morerobotic. They are less likely to think, to question or to challenge any instruction.This, of course, is fine if the instruction is ethical, but what if it is a newspapereditor demanding a phone-hacked scoop or a sales director demanding a salestarget that forces mis-selling? If, at the same time, businesspeople are alsosuppressing their ethic of care, then de facto, they will not feel guilty abouthacking someone’s phone; the victim is just a story, rather than a human being.Likewise, they will be willing to mis-sell a bond to a 90 year-old, who is seen notas a person, but as a sales target.But all is not lost. For these directors and business leaders, their default ‘life’scores as human beings are all above the global average score of 50. This finding,together with experience of working with the boards and senior leaders of majorcorporations, provides the most powerful solution to the challenge ofgovernance, moral leadership and culture. The evidence confirms that the vastmajority of directors are good people who ‘do the right thing’. However, when28
THE BOARD’S ROLE IN ESTABLISHING THE RIGHT CORPORATE CULTUREpeople come to work, they suppress some of their judgement and some of theirhumanity. They become thoughtless and careless. The simple but challengingsolution is to create the right environment, the right culture, for directors, forleaders and for all employees to bring their humanity to work.MoralDNA Ethics in Life and at Work58575655Scores545352LifeWork515049Ethic of ObedienceEthic of CareEthic of Reason48“CULTURE EATS STRATEGY FOR BREAKFAST”This is a quote from a very senior executive responsible for safety at one of themajor oil and gas players. The point he was making is that managing risk in highriskbusinesses such as his ultimately boils down to the character, judgement andbehaviour not just of individuals, but of social groups in the workplace. This iswhat we call ‘culture’. Every workplace has a culture. But it is self-evident thatmany boards and senior executive teams do not properly understand the cultureof their business and then, by definition, fail to influence it in a way that not onlymitigates risk but also enhances the value of the business.Returning to the aforementioned submission to the FRC, the following werethe recommendations on leadership and culture:29
Page 3: BUSINESS RISKA PRACTICAL GUIDE FOR
Page 8 and 9: CONFIDENCEis on the agenda.Insuranc
Page 10 and 11: A WORLD OF DANGERRISKS IN THE REAL
Page 12 and 13: A WORLD OF DANGERinsurance payments
Page 14 and 15: A WORLD OF DANGERROADS TO RUINRoads
Page 20 and 21: www.pwc.co.uk/riskresilienceCreatin
Page 22 and 23: KEY CHALLENGES FACING BOARDS IN RIS
Page 24: KEY CHALLENGES FACING BOARDS IN RIS
Page 27 and 28: CHAPTER 4THE BOARD’S ROLE INESTAB
Page 29: THE BOARD’S ROLE IN ESTABLISHING
Page 33 and 34: THE BOARD’S ROLE IN ESTABLISHING
Page 35 and 36: CHAPTER 5RISK ANDSTRATEGYAlpesh Sha
Page 37 and 38: RISK AND STRATEGYexpected outcome o
Page 39 and 40: RISK AND STRATEGYunderstand the pot
Page 41 and 42: RISK AND STRATEGYRISK GOVERNANCERis
Page 43 and 44: CHAPTER 6DEFINING THE RISKAPPETITE/
Page 45 and 46: DEFINING THE RISK APPETITE/RISK TOL
Page 47 and 48: DEFINING THE RISK APPETITE/RISK TOL
Page 49 and 50: CHAPTER 7BOARD COMPOSITION:KNOWLEDG
Page 51 and 52: BOARD COMPOSITION: KNOWLEDGE VS IND
Page 53 and 54: BOARD COMPOSITION: KNOWLEDGE VS IND
Page 55 and 56: CHAPTER 8THE BOARDROOMCONVERSATIONA
Page 57 and 58: THE BOARDROOM CONVERSATIONresponsib
Page 59 and 60: THE BOARDROOM CONVERSATIONmerits. W
Page 61 and 62: THE BOARDROOM CONVERSATIONcontribut
Page 63 and 64: CHAPTER 9INFORMATIONAND THE BOARDDa
Page 65 and 66: INFORMATION AND THE BOARDIn ensurin
Page 67 and 68: INFORMATION AND THE BOARDparticular
Page 69 and 70: CHAPTER 10INTERACTION WITHSHAREHOLD
Page 71 and 72: INTERACTION WITH SHAREHOLDERSremedi
Page 73 and 74: INTERACTION WITH SHAREHOLDERSBut al
Page 75 and 76: CHAPTER 11THE PERSONAL RISKSFACING
Page 77 and 78: THE PERSONAL RISKS FACING DIRECTORS
Page 79 and 80: THE PERSONAL RISKS FACING DIRECTORS
Page 81 and 82:
CHAPTER 12THE FINALWORDJohn Hurrell
Page 84:
BUSINESS RISKA practical guide for
show all

Click here to download a pdf - Director Magazine

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?