This session was chaired by Tanya Gass, Partner at Norman Broadbent. Speakers were Tina Mavraki, FTSE 100 NED & FI Senior Advisor; Harriet Molyneaux, NED and People & Culture Advisor and ICAEW's Director of Corporate Governance and Stewardship, Peter van Veen.
Corporate culture has moved steadily up the governance agenda in recent years. Once considered difficult to define and even harder to measure, culture is now widely recognised as a critical driver of organisational performance, risk management and long-term success. This panel explored how directors can move beyond abstract discussions of culture and begin to oversee it in practical and measurable ways.
The central message of the session was clear: culture is not an intangible concept sitting outside governance frameworks; it is the behavioural engine through which strategy is delivered.
Why culture matters to governance
The link between culture and governance has become more visible following several high-profile corporate failures where behavioural issues played a significant role. In many cases, organisations had formal governance structures in place but still encountered problems because incentives, behaviours and decision-making processes were misaligned with stated values.
Speakers described culture as the collection of behaviours, attitudes and norms that shape how people in an organisation make decisions when formal rules are not present. From this perspective, culture determines how strategies are implemented in practice. It influences how employees respond to pressure, how risks are escalated and how ethical dilemmas are resolved. For boards, this means culture is not a secondary consideration but a fundamental component of governance. If the underlying behaviours within an organisation do not support its strategy and risk appetite, governance frameworks alone will not prevent problems from emerging.
Culture as ‘strategy in action’
Participants emphasised that culture should be viewed as ‘strategy in action’. While strategy defines an organisation’s objectives, culture determines how people behave while pursuing those objectives.
This relationship becomes particularly important during periods of organisational change. Mergers, restructurings, digital transformations and rapid growth can all place pressure on existing cultural norms.
If leadership teams focus exclusively on structural or financial aspects of transformation while neglecting behavioural dynamics, implementation risks increase significantly. Speakers noted that many transformation initiatives fail not because the strategy itself is flawed, but because organisations underestimate the complexity of cultural change. Boards therefore have an important role in ensuring cultural considerations are integrated into strategic discussions rather than addressed only as a communications or human resources issue or only at a late stage in the transformational process.
Measuring culture: beyond a single metric
One of the longstanding challenges in governance discussions has been how to measure culture effectively.
It is well known that no organisation has a single metric for financial performance: there are balance sheets, P&Ls and cashflow forecasts with many thousands of data points tracked and any number of KPIs. The perspective was put forward that culture is similarly nuanced and complex, so when a board requests that their culture is boiled down to one metric they will be missing vital information for tracking and shifting culture. Speakers emphasised that boards can monitor a combination of data points that together provide meaningful insights into behavioural patterns across the organisation. Examples discussed during the session included:
- employee engagement surveys,
- staff turnover and retention trends,
- whistleblowing reports (including frequency of reports and quality of responses),
- compliance incidents,
- customer complaints and feedback,
- health and safety data,
- operational performance indicators.
Individually, these metrics may not reveal much about culture. However, when analysed together over time they can highlight patterns that signal emerging risks or strengths. For example, a rise in employee turnover in a particular division, combined with declining engagement scores and increased customer complaints, may suggest deeper behavioural issues requiring attention.
One speaker proposed a compelling equation that can help companies to measure their culture:
- Culture = purpose + leadership + internal dynamics + governance behaviours, all of which lead to patterns of financial outcomes.
The importance of qualitative insight
While data plays an important role, speakers cautioned against relying solely on quantitative metrics.
Qualitative insights often provide equally valuable information about organisational culture. Informal conversations with employees, site visits, internal audit findings and feedback from middle management can reveal issues that formal surveys may not capture.
Several panellists emphasised the value of board members engaging directly with employees at different levels of the organisation. Observing how teams operate and listening to frontline perspectives can provide insights that rarely appear in board papers.
Internal audit functions can also play a useful role by incorporating cultural assessments into their reviews. Rather than focusing only on technical compliance, audits can examine behavioural drivers behind operational outcomes.
Incentives and behavioural signals
Another important theme in the discussion was the influence of incentives on organisational culture.
Performance management systems, remuneration structures and target setting all send powerful signals about what behaviours are valued within an organisation.
When incentives focus narrowly on short-term financial performance, employees may feel pressure to prioritise results over responsible decision making. Conversely, balanced scorecards that incorporate ethical behaviour, customer outcomes and long-term objectives can reinforce healthier cultures and enhance longer term business resilience. Boards need to consider whether incentive structures align with the organisation’s stated values and risk appetite. Speakers noted that cultural issues often emerge not because employees intend to act improperly, but because incentives unintentionally encourage undesirable behaviour. Ensuring alignment between incentives and organisational purpose is therefore a core governance responsibility.
The critical role of middle management
Culture is often discussed in terms of senior leadership, but participants stressed that middle management plays a particularly important role in shaping everyday behaviour. Middle managers translate strategy into operational decisions and set expectations for frontline teams. If their actions contradict messages from senior leadership, employees are likely to follow the behaviour they observe rather than the values they hear.
Despite this influence, middle management perspectives are sometimes underrepresented in governance discussions. Boards can strengthen cultural oversight by ensuring that information flows from multiple levels of the organisation, not only from executive leadership.
Understanding how policies and values are interpreted in practice can help identify gaps between intention and reality.
Making culture a governance issue
A recurring message throughout the session was that culture should not appear on board agendas simply as an abstract topic for discussion. Instead, cultural considerations should be embedded across governance processes, including:
- strategy development,
- risk management discussions,
- remuneration decisions,
- operational performance reviews.
When boards examine how behavioural factors influence outcomes in these areas, culture becomes a tangible element of governance rather than a theoretical concept. For example, discussions about risk escalation processes can reveal whether employees feel comfortable raising concerns. Similarly, examining customer outcomes can provide insight into how organisational values translate into practice.
Building a culture of openness and accountability
Ultimately, speakers argued that the most effective cultures are those where employees feel able to speak openly about problems. Psychological safety, that is, the ability to raise concerns without fear of negative consequences, is essential for strong governance. Organisations that suppress dissenting views or discourage escalation often discover problems only after they become crises. Boards have an important role in reinforcing the importance of openness and accountability throughout the organisation.
When leaders respond constructively to challenges and recognise ethical behaviour alongside financial success, they send clear signals about the values that underpin decision making within the organisation.
Culture as a long-term governance priority
As stakeholder expectations continue to evolve and increase, attention to organisational culture is likely to remain a central governance issue. Investors, regulators and employees increasingly expect companies to demonstrate not only financial performance but also responsible and sustainable behaviour.
For boards, this means cultural oversight is no longer optional or peripheral. It is an integral part of ensuring organisations operate effectively and maintain trust with stakeholders.
By combining quantitative indicators, qualitative insights and thoughtful leadership, boards can move beyond vague cultural aspirations and begin to oversee what truly drives behaviour across their organisations.
