How to recognize the right “tone at the top”?

Generally when wrong doing continues or is encouraged in a company, criticism is focused on the “tone at the top.” If integrity is an issue or conflict of interest is commonplace in the company, that’s also thrown back to say tone at the top is not right. If we consider the Board of a company as the body that is in-charge for governance, then they have to set the tone. What sort of people, behaviour and actions would reflect the right tone at the top or at least be acceptable? The following are some ideas..

1. A well-balanced board with diversity by skill, gender and age, selected by a nominating committee independent of the CEO and the major shareholder. They are not like a sailor boarding a ship without a rudder/compass.
2. The board is able to focus on the big picture knows how to stay out of micro managing and focuses on the big picture.
3. There is a culture or climate of trust and candor created where important information is always shared with directors before a decision, in a transparent manner.
4. The selection of independent directors should ensure there’s no conflicts of interest by way of relationships with their own businesses, consulting contracts or personal relationships.
5. A common operating philosophy of ethics and values in business is established through a code of conduct to communicate the importance of ethics and how business should be conducted.
6. The CEO works for the board and not the other way around. The board and CEO foster a culture of open dissent and open debate of strategies and what’s best for the company will be the criteria for selection.
7. Comprehensive and regular briefing of the board on strategic questions and with divisional heads who explain their operations and how they manage risks.
8. Oversight of company finances by qualified independent directors in the audit committee, free of pressure from CEO or management and with ability to hire their own experts. Every board member understands the consequences of significant accounting policies, assumptions, judgments and decisions.
9. Performance based incentive to the CEO and any executive directors is tied to longer term goals and linked to relative performance against competitors. The criteria for such assessment is communicated well in advance and the resources are made available to the top management.
10. Annual evaluation of the board’s performance to examine directors’ confidence in the integrity of the enterprise, the quality of the discussions at the board meetings, the credibility of reports, the use of constructive professional conflict, the level of interpersonal cohesion, and the degree of knowledge at board level.

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About surenraj

“Views expressed are my own”
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3 Responses to How to recognize the right “tone at the top”?

  1. Richard Ebell says:

    Suren, thank you for continuing these posts. I apologize if I seem to keep turning up like a bad penny.

    I have some reactions to what you have written:

    1. For there to be integrity in an organization, there must certainly be the right tone at the top. 2. That tone originates with, and is set by, the leadership. Who that leadership is, is moot. 3. My belief is, for this purpose, the leadership is primarily the Chairman and / or the most influential Directors at a particular point in time (maybe one, two or three in number), whether they are executive or non-executive. Often, their strength may stem from significant ownership of the company. 4. If this leadership does not have integrity, it follows that the Board they put in place will not have integrity either, or will be indifferent or not have the strength of character to challenge when they should. In fact they will be picked based on these special “qualities”! 5. You will never, then, have on the Board the balance required, and the positive outcomes this assures. 6. Quality governance cannot exist if the key “influencers” at any point in time lack integrity. If, on the other hand, they are men or women of integrity, then you can achieve “balance” and all the benefits that flow from it. 7. As time passes, organizations can change, and people and attitudes can change too. So the tone at the top is a living, dynamic thing which can change for the better [?] or the worse [?] over time.

    Does that make sense to you?

    Richard

    • surenraj says:

      Hi Richard, couldn’t agree more with your analysis. A person could be categorized as having ethical integrity to the extent that the individual’s actions, beliefs, methods, measures and principles all derive from a single core group of values, to do the right thing. An individual must therefore be flexible and willing to adjust these values in order to maintain consistency when these values are challenged. The core values are instilled in people from their childhood. More often than not, kids are taught good values and principles. May be it goes wrong when these are challenged in business, because of greed? The environment we live in, the business culture, the acceptance of what is not right, etc all set in motion a change in people’s values and principles. Eventually, if many are doing the wrong thing and also being rewarded, then others perceive that as the right thing to do. It doesn’t make sense if your talking of integrity but hypocrisy may fast be redefined as integrity, if a system of robust monitoring is not put in place.

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