Issue link: https://digital.shearman.com/i/1035494
Shearman & Sterling LLP The Importance of Adding Culture to the Board Agenda | 7 INSTITUTIONALIZING CULTURAL OVERSIGHT COMMITTEE-LEVEL RESPONSIBILITIES CONNECTED TO CULTURE OVERSIGHT Talking about culture is a start, but it does not end there. Company leadership should look at how to institutionalize the culture conversation so that assessing management's efforts on culture is part of the board review every year. Board members need to achieve a level of discipline with respect to culture oversight that is comparable to their practices in the oversight of other risks. In addition, companies need a top-down strategy to demonstrate the culture on an ongoing basis, including finding ways to incentivize employees to act consistently with the corporate culture and ensure long-term strategies for leadership are aligned with the culture. Three steps companies can take to move in this direction are adding culture oversight items to board committee charters (see below), providing disclosure of the company's cultural oversight process in the proxy statement and adding performance measures tied to culture contributions to the annual review of executives and other employees. Audit Committee Compensation Committee Nominating and Governance Committee • Oversight of the results of internal and external audits, compliance reviews, employee hotline or whistleblower reports and regulatory examinations • Oversight of internal controls over financial reporting • Oversight of risk management process • Development of pay philosophy • Design of incentive plans, CEO and senior management performance evaluations and resulting compensation decisions • Oversight of talent strategy (including leadership development plans and goals related to employee engagement, diversity and inclusion) • Development of board governance policies and operating principles • Board composition and succession planning • CEO succession planning • Board performance assessments of the full board, committees and individual directors