Effective Corporate Governance: How Boards Must Shape Culture

We live in an era that demands corporate governance and a code of conduct that goes far beyond what the law requires. Under the U.S. Sentencing Guidelines, boards of directors hold the ultimate responsibility for corporate ethics and by extension their expression in a code of business conduct. Corporate boards are increasingly expected to demonstrate ethical leadership in order to ensure their organization's culture. Culture, not compliance; and values, not rules are the lens by which a company's corporate governance will be judged from now on.

In light of these new standards, boards must help their organizations transition from a culture of rules and laws to a culture of principled performance to accomplish their expanded oversight responsibilities. In a self-governing culture, employees are taught to conduct themselves according to values such as honesty, trust, respect, integrity, openness and responsibility. Values, outlined in a formal code of conduct, inspire people to do the right thing, thereby improving corporate governance.

The U.S. Federal Sentencing Guidelines make it clear that responsibility for good values is a top-down affair, starting with effective corporate governance. Here are five ways for board members to foster a strong, ethical corporate culture to help their organizations succeed and win:

1. Invest sufficient time in the right areas by making business ethics and culture a priority throughout every level of the organization.
2. Find out what is going on for yourself by gathering objective information and going "into the trenches" to interact with business units.
3. Help the company enlist the right people who value character and ethical leadership as well as skill.
4. Examine, ask and assess the essential questions to minimize the chance for future surprises.
5. Align motivations, incentives and inspiration to create a committed culture of enduring significance and value.

Since 1993, LRN has been a pioneer in the field of ethics training and corporate governance, helping nearly 300 companies put effective ethics in business training, compliance risk and corporate governance programs into practice.

LRN's dedicated team of 350 professionals brings a wealth of experience ranging from academia, business, multimedia, software and technology to work with you to create communication and educational training tools that promote and reinforce your code of business conduct as well as your compliance training program. Go to LRN.com to learn how you can develop ethics training and corporate governance programs that will inspire principled performance throughout your organization.