Culture
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The issue of toxic culture haunts UK corporate governance. When coping with a pandemic requiring an agile corporate response it can become dangerously hard to budge. As a country we may have elevated an interest in matters of corporate governance from the pursuit of ‘anoraks’ to that of ‘experts’ and ‘business strategists’ over the last decade, but mind-sets still shudder at change. This is apparent in news this week from two long-standing names in British business: Marks & Spencer (M&S) founded in 1884 and the Institute of Directors, the business lobby group formed in 1903.
While there has been progress on placing women in boardroom positions, the route to corporate power remains pale and male. Worse, when it comes to diversity of thought and background the appointments are rare. Corporate governance circles have become so close-knit in the UK that groupthink repeats itself and revels in the echo, rather than looking for fresh thinking. When even diversity becomes a tick-box exercise, how do you ever get change?
This week’s FT story headlined ‘The IOD loses its second chair in two years’ lays out a timeline of events at an institution which recently called for a new ethical code of boardroom conduct and launched its own centre of corporate governance. Other media coverage of Charlotte Valeur’s decision to resign reveals how ‘diversity’ has become part of the corporate lexicon in a way that is unlikely to be helpful in broadening the pool of talent.
In Daily Business the exclusive story earlier this week of Charlotte Valeur’s resignation as IOD Chair due to time constraints ends: “Ms Valeur discovered five years ago that she is autistic and spoke about it publicly for the first time last month. ‘I have for some years wanted to serve as a director of a FTSE 100 company,’ she said.” “But even now at 56 I’m afraid there may be some board positions I will not get as a result of this.”
The pool of talent available to British business continues to divide between those who spend a great deal of time and effort navigating their journey to the boardroom, and those who may never aim to get there given the current journey – but could be a useful asset if they did. Working out the corporate culture issues that are responsible for throwing up the barriers is critical for better recruitment.
After years of struggling with the concept of digital transformation, M&S announced yesterday that it would be cutting 7,000 jobs over the next three months across its stores and management, blaming the pandemic for “a material shift in trade.” The embattled retailer said operating during the pandemic had showed it could work "more flexibly and productively” with more staff multi-tasking and moving between food, clothing and home departments, reported the BBC.
Visual evidence suggests that rival discounters such as Aldi and Lidl have been moving their staff around the shop floor in varying roles long before the arrival of Covid-19. Today, in August 2020, retail analysts tend to chime in together on the pandemic woes of retailers. But the corporate culture at M&S was only recently revealed after multiple changes in management aimed at a rethink of its strategic direction.
An internal review published in May 2019 identified “corporate vanity” among its middle management, “lost” corporate values and leadership dominated by committees and “resistant to change”. These “defensive” attitudes it said, were to blame for successive attempts to turn around M&S ending up “on the rocks”, reported The Mail on Sunday.
Looking back to 2018, when M&S sought to show how digitally savvy it was by embracing the virtual AGM, there was a surprising twist – no trading update. “If the board believed it wouldn’t meet its profit targets for the year, it would be obliged to issue an update, so there’s likely to be no bad news lurking behind the decision. Although analysts also said that if the firm had good news, it would probably have wanted to share that” reported media coverage.
In hindsight a virtual AGM looks very much like a marketing exercise – not understanding the ‘why’ of online, but still wanting to demonstrate knowing the ‘how.’ It was only very recently, coinciding with the arrival of Covid-19 in the UK in 2020 that leadership at M&S started to look at all diverse. The delay in that development is likely to have played its part in the retailer’s woes, quite apart from the pandemic. While fashion retailer Asos plc is by contrast an online pureplay, it has had a very good pandemic. It has a diverse leadership team, and seemingly an altogether different corporate culture.
Culture and Stakeholders
Corporate culture is defined to a large extent by the management’s approach to the company’s stakeholders. Ethics comes into it as defined by a management mind-set which dictates how those stakeholders, including all employees, are treated. In the US there is now a call for public health experts on boards of listed companies as Covid-19 concentrates minds on the changing nature of risk.
Michelle Williams, the Dean of Harvard’s school of public health is reported to have told the FT: “It’s important for academics and the private sector to come together and stay together. In the business sector there’s a lot of understanding of data… but where business falls short is in understanding behavioural and risk modelling… putting those together is a more holistic and powerful approach.”
Not only has Harvard’s school of public health struck partnerships with companies across industry sectors, but it is reported to be seeing a strong business appetite for a course it is launching on integrating public health principles into business.
While the sudden arrival of mass remote working in the pandemic has contributed to what Alison Taylor of Ethical Systems calls ‘the intangible company,’ public health concerns are responsible for bringing together new challenges across global supply chains. External events are dictating more diversity, not less, to engage workforces and encourage different thinking and new ways of working - British businesses should take heed for better corporate governance.
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