Eating the corporate governance food for thought

nacd summit governance

Although I came to the National Association of Corporate Directors (NACD) Summit in Washington, D.C., to take part in the discussion about boardroom issues and corporate governance, I must admit I’ve had food on the brain.

From talks about digitalization, to personal conversations, to the summit’s ‘Power Breakfasts’, there has been plenty to digest – literally and figuratively – over the past few days.

Perhaps that’s why a culinary quote attributed to the legendary management consultant Peter Drucker kept floating through my mind during the conference: “culture eats strategy for breakfast.”

It’s food for thought in many contexts, but I find it particularly applicable against the backdrop of the NACD conference and global changes in corporate governance and leadership.

Drucker meant that even the best strategy can be undermined by the prevailing corporate culture at a business. This made me think: where is it set in stone that a company can only have one strategy? Can’t a company have a cultural strategy in addition to a business strategy? And if business strategy is dictated in terms of dollars and cents from the top down, how is cultural strategy developed? The answer to that question is increasingly difficult in a globalized world – let me give you an example:

Let’s say a very large company is headquartered in Germany and listed on the German Stock Exchange (DAX). While more than half of its shareholders are non-German, more than half of its business is conducted abroad, and more than half of its workforce is foreign, the CEO and the supervisory board chair are both German.

Is this company defined by a German corporate culture? Would that change if the CEO and supervisory board chair were American, British, or French, or if the company moved to New York, London, or Paris? What would happen to corporate culture if the company stayed in Germany with the same management, but bought out a larger American competitor? Would the company still be defined by a single corporate culture, or by more than one, and if so, which one is more dominant? Is this decided at the top, or does it grow up organically from the (internationally diverse) bottom?

That’s a long list of rhetorical questions, but I don’t think the argument is academic. The scenarios I describe exist in real life, with CEOs and board members crossing borders to take up new positions, and businesses growing increasingly comfortable with international customers, workers, and locations.

It’s a lot to digest, which brings me back to the main course of Drucker’s breakfast feast: strategy. The essence of his quote couldn’t be more applicable to the boardroom of the 21st century – an executive focusing exclusively on strategy in the traditional sense is failing to appreciate the nuances of how corporate culture influences business today, and runs the risk of swallowing a bitter pill.

The word ‘governance’ calls to mind a set of hard and fest rules, while culture is defined in a looser sense. However, the lesson to be learned from Drucker’s corporate governance is that governance and culture should, in fact, be complimentary – like bacon and eggs at an American ‘Power Breakfast.’

Do you agree, or should corporate governance and culture be taken as separate courses? I’d love to hear your thoughts.