Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success

What Is Culture?

The dictionary says culture is the professional atmosphere of a company, along with its values, customs, and traditions. A well-recognized risk management report adds substance and context:

An entity's strategy and objectives and the way they are implemented are based on preferences, value judgments, and management styles. Management's integrity and commitment to ethical values influence these preferences and judgments, which are translated into standards of behavior. Because an entity's good reputation is so valuable, the standards of behavior must go beyond mere compliance with law. Managers of well-run enterprises increasingly have accepted the view that ethics pays and ethical behavior is good business . . . .

Ethical behavior and management integrity are by-products of the corporate culture, which encompasses ethical and behavioral standards and how they are communicated and reinforced. Official policies specify what the board and management want to happen. Corporate culture determines what actually happens, and which rules are obeyed, bent, or ignored. Top management—starting with the CEO—plays a key role in determining the corporate culture. As the dominant personality in an entity, the CEO often sets the ethical tone.¹

The effect of culture can be seen in any company, and German engineering company Siemens is worth a look. Reports say corruption at the company was far reaching, driven by a culture where employees believed bribes were not only acceptable, ...