Organisational Culture development over time
Having a proper organisational culture has been an important topic for companies for a long time, particularly in connection with the financial crisis in 2008. For financial institutions for example the G30 published a report on “Banking conduct and culture: A call for sustained and comprehensive reform” in 2015
Since that time a lot of efforts have been made and most companies have developed an organisational culture in particular defined in a Code of Conduct.
Culture and the UK Corporate Governance Code
The revised UK Corporate Governance Code 2024 came into force on 1st January 2025. The requirement to have a proper organisational culture is laid out in Section 1, Principle B:
The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are all aligned. All directors must act with integrity, lead by example and promote the desired culture.
The more detailed Provisions state in respect of culture that:
The board should assess and monitor culture and how the desired culture has been embedded. Where it is not satisfied that policy, practices or behaviour throughout the business are aligned with the company’s purpose, values and strategy, it should seek assurance that management has taken corrective action. The annual report should explain the board’s activities and any action taken. In addition, it should include an explanation of the company’s approach to investing in and rewarding its workforce.
Looking at the above, regarding the topic “culture”, neither the Principle nor the Provision changed much. But the slight wording changes marked in bold (“all” and “embedded”) show that the FRC wants to see that companies show in their reporting the bigger picture. They want to see that not only the board has thought about a culture but also that this culture is lived throughout the company top down.
This aligns with the general corporate governance notion that strategic decisions need to be delegated down to be implemented throughout the whole company. This should not be a tick the box exercise but a clear explanation of how it is done. Evidence of an embedded culture can be provided in different ways, e.g. via surveys, site visits, direct interactions between the board and employees, unsolicited feedback and a clear explanation as to how issues have been identified and how they are dealt with. This helps to avoid issues in the future and makes your business more resilient and efficient over time.
For expert Corporate Governance advice for your business, please contact us to speak to a member of our Corporate Governance Team.
