The following is a link to a January 2019, letter from State Street emphasizing and focusing on the business’s culture and how it adds value. The letter pertains to corporate culture because of the business in which State Street operates – but what we are really talking about is business or entity culture which includes public companies, private businesses, nonprofits, and governmental organizations and entities.

The letter is short and lacks detailed discussion about culture; however, I found interesting the attachment to the letter with possible questions that might be asked of the board members about the state of the business’s culture and the director’s knowledge thereof. I would assume that the majority of directors could not answer those questions with detail.

I also found interesting that the letter differentiates culture from values, and instead focus’ on culture’s impact on value. However, I would say that the business’s values drive and impact the business’s culture.

As culture has become a board topic (and apparently it might be here to stay), I would like to see additional, more specific discussions about how to evaluate and grade, and improve upon the organization or entity’s culture.

This definitely is a topic for the full board, but as it also falls into the category of risk management or ERM, this might also be on the plate of the risk management committee, if there is one, or on the plate of the audit committee to which risk management is often delegated (but let me also add, in my view, risk management is a topic for the entire board – if risk management is delegated to a committee, that committee should, nevertheless, report on risk management to the full board, for the full board’s consideration).

Here is the link to the State Street letter – be sure to read the attachment https://www.ssga.com/investment-topics/environmental-social-governance/2019/01/2019%20Proxy%20Letter-Aligning%20Corporate%20Culture%20with%20Long-Term%20Strategy.pdf

Best to you, David Tate, Esq. (and inactive California CPA)

Blogs: California trust, estate, and elder abuse litigation and contentious administrations http://californiaestatetrust.com; D&O, audit committee, governance and risk management http://auditcommitteeupdate.com

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