State Street Global Advisors will focus on corporate culture as a top asset stewardship engagement priority in 2019, President and CEO Cyrus Taraporevala announced in a letter to the boards of 1,120 public companies listed in the major global indexes.
In the letter, Mr. Taraporevala said that while corporate culture as an "intangible asset" rather than a tangible one is difficult to measure and manage, "we also recognize that at a time of unprecedented business disruptions, whether in the form of technology, climate or other exogenous shocks, a company's ability to promote the attitudes and behaviors needed to navigate a much more challenging business terrain will be increasingly important."
Citing a report by accounting firm Ernst & Young, Mr. Taraporevala said an average of 52% of an organization's market value can come from intangible assets such as corporate culture, and an accompanying paper cites the U.K. Financial Reporting Council's affirmation in June 2018 of the importance of culture by formalizing boards' roles in aligning corporate culture with purpose, values and strategy in the U.K. Corporate Governance Code.
The paper accompanying the letter provides a framework for companies to evaluate the alignment of corporate culture with their long-term strategies, as well as frameworks on how boards can guide senior management in implementation.
SSGA's paper defines corporate culture as encompassing "a broad range of shared attitudes shaping the behaviors of individuals as a group across an organization," which allows employees to identify with their employers and differentiate them from competitors.
The letter and paper are available on SSGA's website.