Ethics, culture and the board

The tone for any organisation is set from the top. The board sets the values that are to be lived by the organisation and maintains oversight to ensure they are being adhered to.

Board culture

The board itself has a culture: visible patterns of behaviour which emerge from the less visible shared values that have become integrated into how the board works. Some of these values and assumptions are demonstrated in:

• the board and director roles – is the board more of an ‘institutional guardian’ or a ‘public watchdog’? Are board members more ‘free agents’ or ‘group members’?
• the relative power of the board and the executive
• the board’s approach to ethics
• the relative board focus on internal versus external considerations or short-term versus long-term issues
• the extent to which the board focuses on task versus relationship matters

However, a board must ask itself how far the organisational culture stems from the board, and how far the board culture is a reflection of the wider organisational culture. In most cases, it is likely a combination of both.

One determining factor in how the board influences the wider culture can be its composition and the method of appointment of board members. A new board member joining from within the organisation or the sport will bring their cultural expectations moulded by their time interacting with the organisation. An external appointment is less prone to adopt the existing culture of the board, potentially bringing some aspects that may adjust the culture, though they will be unlikely to totally change the existing culture, at least not immediately.

Influencing and nudging the board to recognise the existing culture – building on the positives and marginalising the negatives – can create a board that has greater effect and impact. Board members themselves may be too close to the practicalities, discussions and operations to have a clear view of the culture. Therefore, the most insightful observers of organisational culture are often outsiders. Equally, the individual sitting outside or alongside the board, but within the organisation, can also have insight into the culture of the board and can become a positive influence if there is a need for adjustment or change.

Boards can influence their cultures by:

• making explicit their assumptions around these issues so they can be reconsidered if necessary
• role-modelling (especially by the chair)
• communicating more widely
• increasing board diversity

Ethical culture through board team trust

If an ethical culture is dictated by how a board governs, what will most inform a board’s attitude? Cass Business School’s corporate philosopher Professor Roger Steare argues that it is not through a fixation on additional compliance and structural policies. Instead, a board culture that manages all elements well will be based on shared values and an understanding of the ‘spirit of the law’. This arises from individual character and integrity and will then inform judgement. In turn, this creates behaviours of trust, both within the boardroom dynamic and also outside the boardroom between the board and its key stakeholders. Therefore, an ethical culture in the boardroom – one that will be able to manage all elements appropriately – is one that is based on trust.

This conclusion is similar to the argument made from research by the Great Place to Work Institute, a global workplace consulting firm that compiles best workplaces lists in 29 countries. Its research showed that trust is the bedrock of a positive organisational culture and that a high trust culture defines a great workplace regardless of organisational size, sector or country. Therefore, the ethical practice of developing trust within the board team becomes important.

Trust will bring a higher level of psychological safety, enabling a team to benefit from higher levels of cognitive conflict.

One of the ways that team trust has been conceptualised and measured is through Stephen Covey’s work on the ‘speed of trust’ and his Team Trust Index. His research identifies 13 behaviours that can be measured and benchmarked to high-performing teams. The questions explore the results of self-reported trust in each behaviour – i.e. ‘How do you typically behave within this team?’ – and asks each individual to rate members of the team in each of the behaviours.

The behaviours break down into character-based traits (1–5), competence-based traits (6–10) and combined character and competence behaviours, (11–13). They are as follows:

1. Talk straight – communicate clearly so that you cannot be misunderstood. Don’t withhold information, manipulate people or distort facts.
2. Demonstrate respect – express genuine care for others and show kindness in the little things. Don’t fake respect or only show respect and concern for those who can do something for you.
3. Create transparency – tell the truth in a way that people can verify. Don’t have a hidden agenda and pretend things are different than they are. Err on the side of disclosure.
4. Right wrongs – make things right when you are wrong and apologise quickly. Don’t cover things up or let personal pride get in the way of doing the right thing.
5. Show loyalty – give credit to others and speak about people as though they are present. Don’t take credit, represent people unfairly, or disclose the private information of others.
6. Deliver results – define results upfront, establish a track record and be on time and on budget. Don’t overpromise and underdeliver or make excuses for not delivering.
7. Get better – continuously improve by being a constant learner and receiving both formal and informal feedback. Don’t consider yourself above feedback or assume your knowledge and skills will be sufficient for tomorrow’s challenges.
8. Confront reality – tackle issues head-on, even the ‘undiscussables’. Don’t ignore problems and skip the real issues, even when discussing uncomfortable topics.
9. Clarify expectations – create a shared vision and agreement upfront and renegotiate them if needed and possible. Don’t be vague about specifics or violate expectations.
10. Practice accountability – hold yourself and others accountable for high performance and be clear on how you will communicate how you are doing you and others are doing. Don’t avoid or shirk responsibility or blame others when things go wrong.
11. Listen first – genuinely understand another person’s thoughts and feelings before trying to diagnose or advise. Find out what the most important behaviours are for the person with whom you’re working. Don’t assume you know what matters most to others and therefore speak first and listen last, or not at all, or pretend to listen while waiting for your own chance to speak.
12. Keep commitments – say what you are going to do and then do what you say you’re going to do. Don’t break confidences or make vague and unreliable commitments or never make them in the first place.
13. Extend trust – demonstrate a propensity to trust by shifting trust from a noun to a verb. Do not withhold trust as a default even when there is risk involved by giving people responsibility.

The main takeaways are firstly, that team trust exists over and above the sum of individual trust between directors; secondly, that team trust is measurable; and, thirdly, that those teams with benchmarked high levels of team trust will be those that are the highest performing.

A board culture that role-models high team trust according to the above variables will be one that is better able to manage all elements of their roles and responsibilities, and will thus be one that is modelling an appropriate ethical culture for the rest of the organisation to follow.

Performance culture

The extent to which a board is focused on long-term sustainable performance is dictated by whether it is orientated towards learning, as well as the extent to which it balances its focus on relationships and tasks. This section will explore both of these perspectives on board culture.

Learning Culture

Dulewicz and Herbert define 16 tasks of the board which cluster into four areas. Building on the external versus internal and short versus long-term dilemmas that a board continually faces, Garrett (1995) visualised these four functions while adding a fifth – learning function.

A ‘learning board’ will certainly place significant emphasis and value on their annual board evaluation. However, a board which values learning as a key pillar of its performance will understand that learning is more than just a ‘once a year’ event, building reflection, evaluation and feedback into its meeting process. Research has found that high-performing boards that function at the highest levels are those which are able to look inward and deliberate on their own processes.

Practically, this might look like brief reviews at the end of each meeting, the use of dashboards and scorecards, providing peer feedback, ongoing team coaching and a variety of other methodologies to engender greater psychological safety as a platform for learning.

One of the shared attributes of a learning board will be that of a ‘growth mindset’, as opposed to a ‘fixed mindset’, in relation to both individual contributions and the board’s joint capacity to improve. It can be seen that many of the high-profile boards across different sectors that have been the subject of public scandals were those that had a fixed-mindset culture that did not promote ongoing peer feedback and thus limited learning, growth and development.

Task versus relationship culture

One final perspective through which to consider a board’s culture is to ask, ‘To what extent does a board emphasise cohesive board relationships versus emphasising that a board is simply a place where one must achieve tasks and challenges, with no need for empathy for others?’

There have been many ways of representing these cultural assumptions in the group and team literature; however, Tricker has famously visualised these dynamics in his model describing how boards have different styles of operation.

Tricker defines two axes: the concern for board relationships (high or low) and the concern for the tasks of the board (high or low). These axes create four quadrants with which to diagnose the culture of one’s board.

Firstly, with both low concern for relationships and tasks, there is the rubberstamp board. This board rarely adds much value and is largely symbolic. The second type of board, characterised by high board relationships but a low regard for board tasks, is the country club board. This board probably feels like a nice place to be but is prone to the problems of groupthink and the lack of diversity of opinion.

The third type, the representative board, is characterised by a low concern for relationships, but a high concern for tasks. This board is likely to be the largest board of all four types, ensuring that it meets the requirements of as many stakeholders as possible. The consequences of this are that group cohesion will naturally be lower due to the number of relationships and board directors may slip into the role of external experts, such that there is no sense of team.

Finally, Tricker identifies the professional board, characterised by high concern for both relationships and tasks, as the highest performing. The culture of this board acknowledges the need for strong team cohesion married with appropriate, well-delivered and diverse challenges to enable the board to develop dialogue and deliver effective decision-making.

Again, like all of the perspectives discussed concerning how we might perceive board culture, this framework is a useful tool for a board to open conversations to more fully understand and improve its culture.

How to influence board culture

Bearing in mind that the broader system may have a larger impact, how can a board most influence the impact that it does have? Based on the definition of culture – that a culture is mostly comprised of the unconscious and thus invisible values and beliefs held by individuals and the board as a whole – this is perhaps the wrong question. We cannot focus on influencing a culture directly, as we can only experience instead the visible behaviours that emerge at the tip of a cultural iceberg. What we can do, is enquire into which core values and assumptions have created these behaviours. To do this, we need to facilitate space for the board to reflect on how they have previously behaved and thus of what culture this is indicative.

For example, you do not change an Enron-style unethical board culture simply by asserting that change must happen and that we must become more moral, or by slapping on extra layers of compliance. You help shift this type of culture by enabling an understanding of the assumptions surrounding a fixed mindset and then acknowledging the behavioural effect that this has in the boardroom. This may then create a mindset shift that will translate into different role-modelling behaviours.

Despite what some people think, you cannot simply roll out a culture. It exists as a function of the shared values, beliefs and assumptions within a particular grouping. However, what one can do is to become more aware of where, externally from the board, the culture has arisen such that the board can have more choice when potential ethical, risk and conflict issues arise.

Roger Steare argues that many boards currently do not understand their cultures properly and therefore what they are role-modelling to the rest of their organisation. There is an urgent need to create an understanding of joint values and character and to use this to drive a conversation about who the board actually is. As Steare suggests in a submission to the FRC in the 2010 review of the UK Corporate Governance Code (co-authored with David Phillips, a senior corporate reporter at PwC):

It may also be beneficial for boards to explain the behavioural tone which is established in the way it engages with shareholders and the management team and in the actions it takes. This can be seen as a statement of who we are and what we stand for. In this context, boards may wish to explain what management style and behavioural norms they encourage and what behaviours they will not tolerate.

To enable boards to do this, Steare suggests that boards consider gathering individual director feedback, such as that measured by his ‘Moral DNA’ test, and by implementing some of the following key actions:

• question the purpose of your organisation. Is it meeting the needs of all your key stakeholders?
• challenge your own values, decision making and behaviours as leaders. Are you bringing your humanity to work?
• ask colleagues, participants, suppliers and local communities how they really feel about your organisation. Does it inspire them? Do they love it? Why and in what way?
• when you have the answers to these questions, ask yourself: ‘What are we doing well that we need to keep doing?’, ‘What are we beginning to do well, but need to do more of?’ and ‘What are we not yet doing and need to begin?’

In a similar vein, the 2017 CGIUKI report, ‘Culture in the charitable sector’, provides a number of questions that the board may reflect on to assess to what extent they are role-modelling a positive culture. These include the following:

• has the board set out a clear set of values for the charity and are these reflected in its business model?
• do trustees consistently place the interests of the charity, in fulfilling its charitable objects, above their own?
• has the charity proactively considered its approach to corporate partnerships in general and identified any ethical ‘non-negotiables’ that support the culture and values of the organisation?
• do trustees have personal knowledge of how the charity operates and the impact it has on its intended beneficiaries (and wider society)?

Beyond these recommendations to reflect on and communicate the values and assumptions of the board as a group, what more individual approaches are there to influencing the culture of the board?

In a recent report by the consultancy firm Korn/Ferry, looking at what goes into making an exceptional board of directors, the question was asked, ‘What are the most important characteristics of boards that have an effect on a culture of quality conversations?’ Three characteristics were overwhelmingly mentioned.

Firstly, the report found that the quality of the chair was seen as the most important characteristic, being mentioned by 93% of respondents. The FRC’s 2018 Code (Principle F) outlines the chair’s role in the culture of the board as follows:

The chair leads the board and is responsible for its overall effectiveness in directing the company. They should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates constructive board relations and the effective contribution of all non-executive directors, and ensures that directors receive accurate, timely and clear information.

On the more negative side, the Association of Chairs 2017 report, ‘Managing difficult board dynamics’, lists a number of problem behaviours by chairs that can be markers of poor role-modelling. These behaviours are as follows:

• has difficulty seeking and accepting feedback from others
• fails to make trustees feel their viewpoint is heard and valued, even if it is the minority view
• discourages legitimate questioning and challenge
• offers and defends own decision or opinion too early in discussions, with summing up biased to own views
• tolerates poor behaviour, or is unwilling to stand up to dominant individuals
• dominates discussion
• prone to emotional outbursts, e.g. impatience or defensiveness making it difficult for others to speak up, fails to bring discussion to a decision
• relies on an inner group to make decisions that belong to the board as a whole

Learn more about the role of the chair

It is the responsibility of all the board, but most particularly the senior independent director, the company secretary or governance lead and other board influencers, to notice and challenge these problem behaviours that can be exhibited by the chair.

Developmental processes such as peer feedback, one-to-one coaching/mentoring, or a specific developmental training programme may be useful to support a director to better role-model and fulfil their role-modelling mandate. At the extreme, however, the chair’s position may be challenged if they are not able to shift their problem behaviours.

The second key driver of a positive board culture from the research was ‘directors having a real interest and commitment to the company and its activities’.

This was mentioned by 88% of respondents. Therefore, an effective board culture is associated with directors who are there for the right reasons. Although there may be some level of personal gain that arises from board membership, this must not be the main driver for a director’s motivation.

The best way of encouraging effective board culture is to select more humble individuals and to deselect those that display more heroic, charismatic and potentially derailing tendencies.

The third most significant driver of the board culture from the study was to increase the diversity of the board, which was mentioned by 75% of respondents. This once again reinforces the need to ensure that the leadership of our organisations is as broad, diverse and inclusive as it can be.

Conclusion

Sport and physical activity have a perhaps unrivalled ability to reach across social and geographical divides, bringing people together to share in the benefits, fun and enjoyment they bring. Like any collection of humans, sports and the organisations that run them are dependent on the strengths and weaknesses of those who make them up.

A strong focus on ethics and culture can help to ensure that sport is fair, inclusive, welcoming and enjoyable. It can help to protect those who take part, harness the power of sport to effect positive change and spread the values on which sport should be based. Embedding a healthy, value-driven culture in your organisation is essential to putting its business activities, sporting performance and growth on a sustainable footing.

The fields of ethics and organisational culture in sport are evolving and much work is currently being undertaken, so please be sure to check back regularly as we will be adding to these sections in the future.