Directors need to be active in setting company’s values, says IBE

Boards need to set and maintain company values, says a new report from the Institute of Business Ethics (IBE).

Ethics, Risk &Governance: a board briefing paper aims to help directors define their contribution to the maintenance of sound values and culture. If a sustainable business model is one based on values which engender trust, then it is important for boards to understand trust and the role it plays in their company. Values are thus a primary task for boards, and an integral part of their governance role, maintains the report’s author and IBE associate director, Peter Montagnon.

“Culture affects a company’s ability to generate value. A strong culture makes for sustainable value creation. A weak one can destroy the business overnight. This why is boards must be involved and not simply relegate culture to compliance teams,” commented Montagnon. ”Directors have to understand how values influence the business model and what drives good behaviour by employees.”

Among the report’s suggestions for how boards might do this are:

• Setting the corporate values
• Understanding what drives employee behaviour and using that understanding to ensure the values are properly embedded.
• Assuring themselves that management processes are driving the right sort of behaviour
• That incentives are based on non-financial as well as financial performance
• That targets do not undermine the company’s ethical values
• The character of the chief executive is critical; Boards may well need to fire a chief executive whose values are not compatible with the culture they seek.

The report retails at £30 (IBE subscribers, £24), available here.