Mazars leads the debate on corporate culture at the ICGN Conference

Mazars hosted a successful breakout session entitled: Culture: Strategy for breakfast or dog’s dinner? The session was chaired by Andrew Cave, Associate Editor of Board Agenda UK, moderating three panellist representing the corporate, audit and investor circles:

• Jean-Philippe Desmartin, Head of Responsible Investment at Edmond De Rothschild Asset Management France
• Bruno Heynen, Secretary to the Executive Committee & Senior Advisor Governance at Novartis International AG Switzerland
• David Herbinet, Global Head of Audit & UK Head of PIE at Mazars in the UK.

The discussion focused on the impact corporate culture has on long-term success and how this is being tackled across Europe and reflecting on the results of the recent research report carried out by Mazars, in association with Board Agenda & INSEAD entitled: Board Leadership in Corporate Culture: European Report 2017.

Defining culture: rounding up company, auditor and investor perspectives

Mr Cave opened the debate with a brief introduction to the report’s results and acknowledged the existing disconnect between words and deeds when it comes to boards giving culture necessary importance.

The first question for the panel was how they define culture, and their experience of how boards respectively manage culture within their companies. Mr Heynen stressed the difficulties of reaching a global consensus on the meaning of culture for organisations, stating “culture starts with company values – each company defines its own values.” He believed the role of the CEO is more crucial than that of the board’s. Mr Herbinet outlined the role of auditors when assessing culture, describing the research undertaken by Mazars’ to develop a methodology that looks at culture in terms of triggers and responses.  Culture triggers & responses can be evidenced and therefore audited, and the responses to these triggers are traces that can be overseen. Mr Desmartin emphasized that investors are interested in strategy, but acknowledge that each company has its own culture and that this is “a specific and unique asset for a company – a long term asset that differentiates a company against its competitors.”

Experiences with culture changes

The following question addressed how the panel have experienced cultural changes within their organisations. Mr Heynen made reference to Novartis’ drastic cultural change in the past two years, citing the company’s focus on cooperation over performance, redefining the company values from 16 to six and implementing the targeted culture through the use of incentives for all employees. Mr Herbinet shared his insight on boards and how their lack of a clear culture presents a problem for Mazars in their financial audits. In his opinion, benchmarking culture to therefore define a targeted culture is essential for board members.

Key steps to build a successful corporate culture: main takeaways

The panel was asked to present the audience with some key steps to build a solid culture. Mr Heynen gave three of his personal must-dos:

1. Conduct a global survey within the organisation to understand the way employees perceive culture
2. Use third-party information to better understand culture
3. Allow board members to pay surprise visits to other levels of management and employees in the company.

Mr Herbinet commended the Dutch for their leading role in incorporating culture into their governance agendas and insisted on the role of triggers and responses as a means to interpreting answers to employee questionnaires relating to culture. Finally, Mr Desmartin suggested board members should spend more time with middle management to ensure that the targeted culture is cascaded down.

Q&A with the attendees 

During the Q&A, attendees did not shy away from digging deeper. The first question focused on the different methods used to reward or punish compliance with culture. Mr Heynes detailed the incentive model used at Novartis, which scores employee compliance levels, and views this approach as a good driver to cultural change within an organisation. Mr Herbinet stated that in Mazars’ methodology there are 60 variables and incentives comprise only two of them. He believes that the “key level is middle management” and this is where attention should be directed, a position Mr Desmartin agreed with. The final question addressed the extent to which change in culture requires change in board members. The three panellists emphasized the importance of adaptability and the ability of boards to ‘refresh’ their members if they cannot evolve with the desired culture.

Final reflections

After a successful two-day event packed with insightful discussions on the importance of responsible boards, corporate culture and good board practices, the ICGN 2017 Paris conference came to a close. The conference was a valuable opportunity for Mazars to hear the views and challenges faced by investors and corporate governance professionals. We are proud to have participated in this essential dialogue and we continue to acknowledge the importance of building a sustainable path for stable financial growth.