Episode 5: What Boards Really Mean by Culture
- Mar 10
- 7 min read
Leadership, governance, and the decisions that shape organizational culture.
Welcome to What They Don’t Tell You — a leadership podcast from Deabadh Group.
In Episode 5, William Warren explores one of the most overused words in business: culture.
Boards talk about culture constantly. Leaders talk about it in town halls. HR teams measure it in engagement surveys.
But when boards ask about culture, they often mean something very different from what executives think they mean.
In this episode, William explores the governance reality behind the word — and why culture ultimately shows up not in slogans or workshops, but in patterns of decisions made under pressure.
Drawing on Deabadh’s work with leadership teams and boards around the world, this episode examines:
The governance responsibilities that shape how boards think about culture
Why culture failures were at the heart of the 2008 financial crisis
How culture quietly erodes organizations long before a crisis becomes visible
Why retention bonuses and engagement initiatives cannot fix a culture that leaders no longer trust
And why boards are not looking for culture theatre — they want predictability when volatility rises
As William explains, culture is not the mood of an organization.
It is what people do when the boss isn’t in the room.
And that has direct capital consequences for companies, from trust and reputation to enterprise value.
🎧 Listen to the Episode
Key Insight from the Episode
Culture is often treated as a soft concept.
But boards see it differently.
From a governance perspective, culture connects directly to three foundational fiduciary duties:
Duty of Care – making informed decisions based on facts
Duty of Loyalty – acting in the best interests of the company
Duty of Obedience – ensuring the organization operates within legal and governance frameworks
When culture fails, those duties fail.
That is why post-financial-crisis regulatory reviews repeatedly identified culture as a root cause of major institutional failures, not intelligence or strategy.
The Deabadh Perspective
At Deabadh, we often see boards ask for culture reviews.
Executives frequently respond with engagement surveys or values workshops.
But boards are often asking something different.
They want to understand:
How decisions are made under pressure
Whether risk tolerance is aligned with strategy
Whether leaders challenge assumptions or avoid conflict
Whether whistleblowing signals deeper governance concerns
In other words, they are asking whether the organization will behave predictably and responsibly when volatility increases.
That is culture.
A Leadership Reality
Organizational culture failures rarely arrive as dramatic scandals.
More often, they look like:
talented leaders quietly leaving
decision cycles slowing
challenge disappearing from leadership discussions
trust eroding internally and externally
Over time, the organization becomes slower, more fragile, and more exposed to risk.
Strong cultures do the opposite.
They create clarity under pressure, increase decision speed, and reduce friction across the organization.
Final Thought
Boards do not want culture theatre. They want confidence that when they are not in the room — which is almost always — the organization will make decisions consistent with its values, strategy, and responsibilities. That is often what boards really mean when they talk about culture.
Full Episode Transcript
Below is the full transcript of Episode 5 of What They Don’t Tell You.
Welcome to What They Don’t Tell You from Deabadh Group. This is a podcast about leadership as it’s lived. I’m William Warren. I work with leaders who carry real responsibility for people, for decisions and for consequences. In these episodes, we explore the parts of leadership that usually don’t get said out loud. The doubts, the trade-offs, the weight of judgment, and what it actually costs to try to do the right thing in a complex and changing business world. These reflections are shaped by more than 20 years of work with leaders across 60 countries. I’m telling it like it is. Let’s begin.
In this episode, I want to talk about culture.
Specifically, what boards mean when they use that word.
Culture is one of the most overused terms in business. The classic definition comes from Marvin Bower, the long-time managing director of Mckinsey considered by many to be the father of the modern consulting industry. The widely cited formulation of Bower’s aphorism is “culture is the way we do things round here”. Terrence Deal & Allan Kennedy in their book Corporate Cultures The Rites and Rituals of Corporate Life from (1982) used the expression to describe the informal norms and behaviors that shape how organizations actually operate on a day to day basis.
This Organizational Culture phrase stuck because it captures something executives instantly recognize: Culture shows up in decisions, meetings, who gets promoted, who gets exited, risk tolerance and how people treat each other. Another and even more helpful way of looking at culture is as follows. Culture is what people do when the boss isn’t in the room.
This is a particular issue for Company Boards who by definition are not in the room on a day-to day- basis. Many governance scholars summarize the boards role in one sentence as “management manages, the board governs”.
As those of you who have worked with us at Deabadh know, we love calibration and lists of what best in class looks like. Through our perceptual framework we look at the individual leader, here I am talking about the Board as a collective entity and what they mean by culture.
To frame the discussion let’s take a short while to look at the top 3 legal foundations of Board Behavior. Across jurisdictions -whether the company is public or private, whether the board is unitary or supervisory- board conduct is shaped by what are called fiduciary duties. These are:
Duty of Care- make informed decisions based on facts not opinions
Duty of loyalty- to act in the company’s best interest
Duty of obedience- to ensure that the company follows laws and governance rules
The next level of detail is even more interesting when it comes to culture. Here are the top 10 responsibilities of a good board for a Company in our view at Deabadh
Ensure ethical conduct and organizational culture
Guide corporate strategy
Hire, oversee and if necessary replace the CEO
Monitor Management performance
Oversee risk management and internal controls
Ensure integrity of financial reporting
Protect shareholder and stakeholders interests
Approve Capital allocation
Design and approve Executive Compensation and incentives
Maintain effective board governance and independence
After the 2008 global financial crisis, multiple regulatory reviews identified culture as a root cause in conduct failures. Not intelligence. Not strategy. Culture.
In the UK the Parliamentary commission on banking standards report concluded that many of the major failures in the banking sector stemmed from deep-seated cultural problems inside financial institutions. In the United States post crisis regulatory reviews concluded that deficient organizational culture was a major driver of misconduct and excessive risk taking. The Financial crisis inquiry report highlighted how compensation structures, weak board oversight and a culture- that word again- a culture that prioritized short-term profit over prudence encouraged excessive leverage and risk-taking.
Even more concerning for boards is the effect that poor organizational cultures have on trust in companies. Indeed The Edelman Trust Barometer continues to show that institutional trust declines sharply following ethical lapses. We know from our work at Deabadh that Trust, once damaged, is expensive to rebuild.
So we can say that Culture has capital consequences. It directly affects the bottom line, enterprise valuation as well as the softer scores around employee engagement and the Employer Value Proposition. This is why boards are, rightly very invested in understanding the Organizational culture and in ensuring that what happens when the boss isn’t in the room, so to speak, is in accordance with our values as a Company.
Here’s the problem.
Some years ago I observed a board request a culture review. The executive team prepared engagement surveys and values workshops. The board though was concerned about something else. Two whistleblowing cases. Increasing regulatory scrutiny resulting in slowing decision cycles.
You see- When boards say culture, they sometimes mean risk which is number 5 on our list.
Culture as we saw earlier is not the mood of an organization, It show up in the pattern of decisions made under pressure.
Another example -After a merger, one company achieved its financial targets. Integration appeared smooth. But leaders from the acquired company stopped challenging assumptions. Within 6 months, 5 high-potential executives from the acquired firm left. No crisis. No scandal. Just erosion. You might argue that this would be expected- however this was a professional services firm where the intellectual property or dare I say capital rides up and down the elevator every day. Those high potential leaders took major clients with them along with a serious amount of billable hours. To add insult to injury the fact that the acquiring firm couldn’t demonstrate a culture sufficient to keep them damaged the merged entity reputationally.
Many listeners to this who work in Mergers & Acquisitions, corporate development or human resources may well observe from this example a simple solution. It is, after all, best practice for the merged entity to draw up a list of High potentials during due diligence and to make sure there are retention bonuses in situ to minimize the very eventuality I have described above.
Well- here’s what they don’t tell you on this- retention bonuses won’t keep the very best if those leaders are unhappy with the corporate culture. Millenials and Genz never mind Gen alphas quite rightly will prioritize their well- being and mental health over financial gain. You see maybe Fred Herzberg was right in when he described money as a hygiene factor in his two-factor theory of motivation and that was way back in 1959. So perhaps Human nature doesn’t change too much after all.
You see -Organizational Culture failure rarely announces itself. It erodes quietly.
McKinsey’s research suggests organizations with strong cultures significantly outperform peers over the long term. Why?
Because clarity under pressure increases speed. Trust reduces drag.
Alignment reduces error. Boards do not want culture theatre.
They want predictability when volatility increases.
And that is often what they mean by culture.
If any of this resonated with you, you’ll find more about our work at deabadhgroup.com
Thanks for listening.
Until next time.
Comments