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HB
HB 4082006

Corporate Governance Culture

HB 4082006

Handbook
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Corporate governance culture

First published as HB 4082006.

COPYRIGHT Standards Australia All rights are reserved. No part of this work may be reproduced or copied in any form or by any means, electronic or mechanical, including photocopying, without the written permission of the publisher. Published by Standards Australia, GPO Box 476, Sydney, NSW 2001, Australia ISBN 0 7337 7491 1

HB 4082006

ii

Preface
This Handbook was prepared by the Standards Australia Committee MB-004, Business Governance. The contribution acknowledged: Tania Stegemann Garry Taylor Lyndal Drennan Fiona Guthrie
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of

the

following

individuals

is

The object of this Handbook is to provide guidelines for small to medium enterprises to develop an effective and relevant corporate governance culture. This handbook does not assert to provide material that can be substituted in place of requirements by law for listed entities or other organisations. Section 1 introduces the document and provides the application and scope for the document. Section 2 introduces the concept of corporate governance culture by defining corporate governance and corporate governance culture. Section 3 provides information on the different individuals who are responsible for the corporate governance culture. Section 4 details the requirements for an effective corporate governance culture, and discusses the different elements within each of these requirements. Section 5 describes how to embed an effective corporate governance culture within an organisation by conducting a cultural inquiry, identifying any gaps through a cultural audit and changing the culture of an organisation. Section 6 provides guidelines on the strategies to deal with breaches. It is hoped that this Handbook will form the beginning of a dialogue with industry whereby experiences and information about corporate governance culture can be shared. Standards Australia welcomes feedback on this Handbook, in relation to corporate governance culture issues and experiences.

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HB 4082006

Contents
Page 1 Application and scope 1.1 1.2 1.3 2
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Application..................................................................... 1 Objectives ..................................................................... 1 Guidance and documents.............................................. 1

Corporate governance culture 2.1 2.2 2.3 Corporate governance................................................... 2 Culture........................................................................... 2 Definition of corporate governance culture .................... 2

Who is responsible for the corporate governance culture? 3.1 3.2 Role of leaders .............................................................. 4 Responsibilities of stakeholders .................................... 5

Characteristics of an effective corporate governance culture 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Commitment by the board and staff............................... 8 Governance environment and ethics ............................ 8 Visibility and communication ....................................... 10 Continuous improvement............................................. 10 Governance structure ................................................. 10 Education and training................................................. 11 Liaison with stakeholders ............................................ 11

Embedding an effective corporate governance culture 5.1 5.2 5.3 5.4 5.5 Introduction ................................................................. 13 A cultural inquiry.......................................................... 14 The culture audit ......................................................... 15 Undertaking cultural change........................................ 15 Ongoing monitoring ..................................................... 16

Dealing with breaches 6.1 6.2 6.3 6.4 Introduction ................................................................. 17 Identifying breaches .................................................... 17 Dealing with staff......................................................... 17 Righting the wrong ...................................................... 18

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HB 4082006

NOTES

iv

HB 4082006

1 Application and scope

This Handbook provides guidance in relation to the development of an effective corporate governance culture within organisations. This Handbook should be read in conjunction with AS 80002003, Good governance principles.
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1.1 Application
This Handbook is aimed at small to medium enterprises and provides a brief discussion of the elements that could be introduced into an organisation to establish such a culture. This Handbook does not propose to substitute or limit specific requirements for listed entities or other organisations required by law to comply with various corporate governance pronouncements and standards. Not all organisations have a Board of Directors therefore a reference to the Board of Directors throughout this document also refers to the governing body of the entity regardless of the ownership structure.

1.2 Objectives
The purpose of this Handbook is to (a) provide guidance on the general concepts and elements which comprise an effective corporate governance culture; and provide a brief discussion on accountabilities and monitoring of the corporate governance culture.

(b)

1.3 Guidance and documents

Other documents in the Standards Australia series which provide guidance in this matter include: AS 8000 AS 8001 AS 8002 AS 8003 AS 8004 AS 3806 AS/NZS 4360 HB 405
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Corporate governance Good governance principles Corporate governance Fraud and corruption control Corporate governance Organizational codes of conduct Corporate social responsibility Corporate governance Whistleblower protection programs for entities Compliance programs Risk management Disclosure and Transparency Framework
Standards Australia

HB 4082006

2 Corporate governance
culture
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2.1 Corporate governance

AS 8000 defines Corporate Governance as: 'The system by which entities are directed and controlled'. It is concerned with improving the performance of companies for the benefit of shareholders, stakeholders and economic growth and encompasses authority, accountability, stewardship, leadership, direction and control exercised in the organisation.

2.2 Culture
Culture can be defined as: 'A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, and that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think, and feel in relation to those problems' (Schein, E)*. It would follow, therefore, that organisational culture is the pattern of organisational responses learned for solving problems.

2.3 Definition of corporate governance culture

Given our discussion of corporate governance and culture above, an effective corporate governance culture can be defined as:

* Schien, E.H. 1985 Organizational Culture and Leadership, Jossey-Bass.

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HB 408-2006, Corporate governance culture

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