Who’s really in charge of company culture?

How much does the board influence company culture? Corporate governance expert Lucy Marcus goes behind the scenes.

Recent stories about the culture at online retailer Amazon gave me pause. An investigative report by the New York Times described a fairly toxic work environment, using phrases such as “purposeful Darwinism”.

The story has kicked off an important public debate about the work environment at Amazon, the technology sector more broadly and the workplace more generally.

As I read the New York Times article, Amazon’s response, and the comments and commentary from past and present employees, I kept thinking about the role that board members play in creating, encouraging, addressing or fixing a company’s work environment. How much influence can the board have over company culture, particularly at a company the size of Amazon?

At first glance, the answer might seem to be that the board has little influence over corporate culture. After all, the chief executive and executive team set the tone, and the full board meets, at most, once a month.

But, in actuality, the board can have a big impact — if it chooses. And I believe directors must take responsibility to do so. Some cultures have been specifically engineered, and others have developed organically. Once a culture is set it is a real challenge to change it, but it can be done.

Looking at Amazon, many of the concerns fall into several categories that the boardroom is charged with addressing, including issues around HR policies, ethics, risk, compliance and corporate social responsibility.

Boards have a responsibility for ensuring ethical behaviour. This is often defined as setting rules about the way the company works with partners and the community, but it also applies to the way the company treats its employees. Behaviour that does not follow an ethical code, including treating employees poorly or creating a hostile work environment, most definitely puts the company at risk.

Risks

A damaging corporate culture, where employees are treated poorly, can lead to high staff turnover and an environment that is detrimental to the long-term health of the company and its employees. And that is squarely a board level problem. The public debate about workplace environment is an important reminder to directors that this issue is in our domain, and a reminder to employees that we might not be fully aware of a damaging situation if you don’t tell us.

Non-executive members of the board tend to be somewhat distant from the everyday dealings of the company. Non-executive directors should be "hands on but not hands in". We don't necessarily observe or take part in the day-to-day interactions of people in the company since we don’t go into the office on a regular basis. 

However, if something is going awry with a company’s culture, there are ways to learn about it before it becomes a major front page story. There are official channels, such as whistle blowing, formal complaints or staff surveys. Chatting with employees we might know or meet, newspaper articles, following social media generally keeping a finger on the pulse of things and keeping tuned to the way the place feels as we walk around the hallways is a more organic and informal way to keep an eye out for cultural issues. I’ve received emails and letters from company employees alerting me to a concern. I always investigate to find out more about it, and other directors whom I know do as well.

What boards must do

Boards are bound to examine the labour practices of the company to make sure they comply with laws and uphold an ethical standard, and they must also ensure that labour practices are sound throughout the company, from the executive suite to the shop floor, be it in the US, Bangladesh or China.

Boards must keep an eye out for workplace issues, including diversity practices, recruitment and retention, and workforce trends. If companies are recruiting good people but aren't able to keep them, we need to ask why. Judging from the anecdotes in the New York Times articles, which described employees who were edged out and noted “many others flee, exhausted”, that may have been the case for Amazon. Were there data to show this trend over time? If the company isn’t providing board members with the data they need to make an assessment, board members need to ask for it.

Much is made of the perks of working at technology companies, but there is one crucial thing to keep in mind, and the Amazon story illustrates it well: we mustn't confuse perks with genuine concern for the workforce. Kitchenettes filled with candy and bottled water and free gourmet meals can’t be used to cover up larger, fundamental concerns about how employees are treated. In the end, those so-called perks are not what keep people working and healthy. Treating people with respect and humanity is what is needed.

Though non-executive board members are removed from the day-to-day issues, we must step up and ensure that we are asking the right questions and addressing underlying issues of corporate culture to ensure that businesses are built for the long term.

Lucy Marcus is an award winning writer, board chair and non-executive director of several organisations. She is also the CEO of Marcus Venture Consulting. Don’t miss another Above Board column by subscribing here. You can also follow Lucy on Twitter @lucymarcus.

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