A strong corporate culture is a valuable asset

Date: October 22, 2020

First published in Business Times on 13 October 2020

Quick Read

  • The Monetary Authority of Singapore has issued Guidelines on Individual Accountability and Conduct for financial institutions (FIs) to promote ethical behavior and accountability among all employees.
  • Securities Investors Association (Singapore) believes that a strong and ethical corporate culture is necessary for these measures to be effective in promoting responsible behavior and gaining the market’s respect and confidence.
  • Companies with a strong culture are less likely to run into financial mismanagement and ruin and are better equipped to deliver superior performance for their stakeholders.
  • The right culture can drive profitability, acquisition decisions, and ethical behavior among employees.


Companies with a robust and ethical culture in place are better equipped to deliver superior performance for their stakeholders and gain the market’s confidence.

The Monetary Authority of Singapore (MAS) last month issued its Guidelines on Individual Accountability and Conduct, which contain measures that financial institutions (FIs) should put in place to “promote the individual accountability of senior managers, strengthen oversight over material risk personnel, and reinforce standards of proper conduct among all employees”.

This is very welcome as FIs play a crucial role in safeguarding the integrity of the financial system. Indeed, if trust in FIs is eroded, the entire market suffers and this can have dire consequences for the whole economy.

However, in the view of SIAS, or Securities Investors Association (Singapore), before procedures, processes and safeguards to promote ethical behaviour and accountability can be properly effective, one important ingredient has to be in place – the right corporate culture. Furthermore, this is true of all organisations, not just FIs, for without the right culture, all companies will eventually run into trouble.

In this connection, SIAS notes that MAS has actually alluded to culture when it said in its Guidelines that “embedding a strong culture of responsibility and ethical behaviour in FIs requires individual accountability on the part of senior managers and a supportive governance framework”.


In SIAS’s experience, companies with strong, ethical cultures in place stand a much better chance of gaining the market’s respect and confidence. They also are less likely to run into financial mismanagement and ruin if all employees, not just top management, behave honestly. By so doing, such organisations are much better equipped to deliver superior performance for their stakeholders than those that do not place sufficient emphasis on integrity, transparency and fairness.

However, before continuing, it is timely to ask: What exactly is corporate culture?

Winfried Bischoff, chairman of the UK’s Financial Reporting Council (FRC), in his speech at the launch of SIAS’s 2017 Corporate Governance Week, spoke extensively about the importance of companies having a strong and ethical corporate culture in ensuring good governance.

“Culture in business is a key ingredient in delivering long-term sustainable performance. When there is a healthy culture, the systems, the procedures, and the overall functioning and mutual support of an organisation exist in harmony. This brings enhanced integrity, confidence, long-term success and ultimately trust. A poor culture is in my view a significant business risk in itself,” he said.

In the UK, the importance of the right culture is enshrined in its Code of Corporate Governance, which right at the outset explicitly states that “a company’s culture should promote integrity and openness, value diversity and be responsive to the views of shareholders and wider stakeholders”.

In recent years, culture has become a commonly used buzzword in the business community, mainly because there is an increasing body of evidence that links culture with successful performance.

For example, studies have shown that corporate culture can drive profitability, acquisition decisions, and even affect whether employees behave ethically. Also, companies with effective corporate cultures are less likely to be associated with unethical behaviour and short-termism and indulge in activities to artificially boost share prices.

It is, however, important to bear in mind that having the right culture does not automatically translate to commercial success, while non-culture-related factors can cause business failures.

On this latter point, a good example would be the collapse of numerous oil and gas companies several years ago when oil prices plunged sharply – the failure of firms such as Ezra, Swiber, and Swissco was not necessarily because of weak culture but instead because of an unprecedented event that affected the entire industry beyond the control of management.

By the same token, having the right culture means having a proper risk assessment framework in place, which requires division of responsibilities, a significant degree of independence on the board and sufficient checks and balances. One only needs to consider water treatment firm Hyflux’s ill-fated diversification into the power generation business to see how important it is to have a strong culture that rigorously and accurately assesses project risk.

How might companies embark on establishing a strong culture? In 2016, the UK FRC commissioned a study into the subject, and its findings are instructive. First and foremost, the FRC found that culture emanates from the board level.

“A healthy corporate culture is a valuable asset, a source of competitive advantage and vital to the creation and protection of long-term value. It is the board’s role to determine the purpose of the company and ensure that the company’s values, strategy and business model are aligned to it. Directors should not wait for a crisis before they focus on company culture,” said the FRC.

“Leaders, in particular the chief executive, must embody the desired culture, embedding this at all levels and in every aspect of the business. Boards have a responsibility to act where leaders do not deliver.”

In other words, boards have to lead by example, since their behaviour sets the template for the rest of the organisation’s conduct.

Some observers have complained that there appears to be a rise in the number of corporate governance lapses in the local stock market. Could it be that the companies involved did not have strong, dependable cultures?


Possibly; in some cases, the problems have stemmed from board upheaval and instability (the departure of key directors and financial controllers is often a harbinger of problems to come) and as noted earlier, culture’s origins are at the board level so if it starts off weak, then the rest of the organisation tends to suffer the consequences.

It is not just companies that have to be mindful of developing a strong and ethical culture. Regulators too, must also play their part – in Australia, for example, Greg Medcraft, chairman of the main regulator, the Australian Securities and Investments Commission (ASIC), said in his 2016 speech on the importance of corporate culture in improving governance and compliance that if the ASIC identifies poor culture it will alert its listed firms.

“In particular, we think it is important to share this information with directors of regulated entities, given their role in guiding and monitoring the management of the company”, said Mr Medcraft.

Investors too must play their part by asking their managements to comment on the culture that prevails within their companies and whether the board and senior management have done their best to infuse a strong, ethical and honest culture throughout their organisations.

Whatever the case, the lesson for corporate Singapore is clear: companies, their boards and regulators should try as far as possible to focus on and establish strong corporate cultures to ensure long-term survival of the business sector.

  • The writer is David Gerald, founder, president and CEO of the Securities Investors Association (Singapore)