Investors, board directors, index providers, academics and regulators convened at the Council of Institutional Investors' spring conference in Washington on March 12-13 to talk about everything from corporate culture to board diversity to multiple share class structures.
On a March 12 panel on how board members should oversee corporate culture, Ruth Ann Marshall, a director at Conagra Brands Inc., Global Payments Inc. and Regions Financial Corp., said it can be challenging to measure corporate culture because "it's attitudes and behaviors." However, there are red flags that can indicate a company's culture is unhealthy and warrant investigation by board members, Ms. Marshall said.
The red flags, outlined in a 2017 report from the National Association for Corporate Directors, are:
- a focus on performance and little on how it's achieved; high performers operating outside of the companies' policies;
- frequent requests for exceptions to codes of conduct;
- a "go along to get along" kind of attitude;
- relationships outweighing skills in determining promotions or other recognition; and
- discouraging the of sharing bad news.
"If you start to see any of these activities occurring, raise your hand. Do some investigation," Ms. Marshall said. Overall, the NACD report argues that corporate culture, good or bad, can impact a company's performance and reputation.
Multiple panelists suggested mystery shopping as a way for boards to evaluate a business-to-consumer company's culture and understand how customers are ultimately being treated. "Corporate culture is not headquarters culture. It permeates the entire employee base," Ms. Marshall said.
Elizabeth Duke, chairwoman at Wells Fargo & Co., said mystery shopping is one of the tools Wells Fargo is using to help assess the company's culture.
In September 2016, Wells Fargo made settlements totaling $190 million over allegations of retail banking sales practice abuses. The next month, John G. Stumpf stepped down as chairman and CEO. Stephen Sanger, who replaced Mr. Stumpf as chairman, retired at the end of 2017 and was replaced by Ms. Duke. In the director election vote at the company's annual shareholder meeting last April, Mr. Sanger received one of the lowest levels of support at the company, at 56% of shareholder votes cast.
To evaluate the corporate culture at business-to-business companies like Conagra, Ms. Marshall suggested board members attend industry shows and visit the company's booth along with competitors' booths to hear what representatives have to say about the companies' reputations.