16 July 2018 saw the launch of the FRC’s new Corporate Governance Code ,which has got us talking about what it means for boards and their organisations moving forward. In its first section, ‘Board Leadership and Company Purpose, one of the five principles states:
“The board should establish the company’s purpose, values and strategy, and should satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example, and promote the desired culture.”
This new shift in guidance from the FRC seeks to get boards to strike a balance between driving the organisational strategy and promoting the equal importance of the corporate values and culture. Progressive boards already get that integrating purpose, strategy and culture into one single narrative engenders credibility and buy-in. Stakeholders also understand the need for profitable growth as part of the business ecosystem. The challenge is in getting leaders to join the dots between the business direction and its purpose (the 'what' and the 'why'). Only in this way can the board make the links that the business and its people need between ethical, commercial and sustainable growth, which drives discretionary effort.