Companies need to rethink organisational culture to stay relevant: panel at conference

WHILE there is a need for companies to build transparent, open and modern cultures to stay relevant to stakeholders, imposing mandates on businesses to be more progressive and adaptive is unlikely to yield positive results, said the panellists at a workshop on Thursday (Oct 14).

They were speaking at an event on the calendar of Corporate Governance Week, a 6-day conference held by the Securities Investors Association (Singapore) (Sias).

Said Erik Vermeulen, a professor of business and financial law at Tilburg University in the Netherlands: "It's not only about selling a product anymore, it's selling an experience. And the internal culture, the talent that you attract, the way you communicate is definitely part of it."

Fundamentally, a company is an ecosystem and an "evolving organism" where one has to constantly stay relevant to people - not just shareholders and capital providers - but stakeholders such as customers and the community, said Singtel's group chief financial officer Arthur Lang.

Having a diverse board, for instance, is one way to rethink an organisation, said David Smith, senior investment director of abrdn. "It is important that we have diverse skill sets, backgrounds, thought processes and experiences on the board." This diversity could potentially lead to better answers, as opposed to everyone constantly coming up with the same solutions, he added.

But the panellists said that imposing mandates to encourage companies to rethink their organisational culture may not be effective - for instance, regulations dictating that a company have a certain number of independent directors on the board; rules cannot be imposed upon the qualities of these directors or the types of discussions the company has, said Smith.

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"If you put rules in place to mandate innovation, they're probably going to massively backfire," he suggested.

Vermeulen agreed, saying that as soon as one starts codifying something as mandatory, it might fail. Desired practices can instead be cast as guidelines or principles, he added.

"I see the regulator, the stock exchange as part of the ecosystem, part of the stakeholders that you have to communicate with in order to co-create and remain relevant," he added.

Chew Chin Yee, managing director of the Singapore Exchange Regulation (SGX RegCo), said rules and mandates are in place to serve as a baseline, but there are indeed areas - such as the progressiveness of a company - that will be hard to track.

He said regulators can therefore play a role in signalling where the market should head, and highlight areas in which it could evolve.

On the tensions between inculcating an innovative mindset and adhering to rules, Singtel's Lang said he believes that they are in fact not at odds with each other.

"Having a good set of governance principles will allow the right environment for the management to be a lot more innovative and resilient," he said.

While he supports some level of codifying corporate governance, hiring the right people and instilling the right culture of sensible risk-taking are also important in order boost innovation and react to changes in the environment, he said.