Corporate Culture: Evidence from the Field

Abstract

Ninety-two percent of the 1,348 North American executives we survey believe that improving corporate culture would increase firm value. A striking 84% believe their company needs to improve its culture. But how can that be achieved? Our paper provides some guidance by documenting the following: executives' views on what corporate culture is and how it operates, distinguishing between stated values and everyday norms; the extent to which culture is perceived to influence value creation (productivity, mergers), ethical choices (compliance, short-termism), and innovation (creativity, risk-taking); and a list of obstacles that can prevent culture from being where it should be (inattentive leaders, misaligned incentive compensation). Finally, we provide evidence that the executives' survey responses are consistent with external data.

See our related paper: Corporate Culture: The Interview Evidence.

Keywords: Corporate Culture, Values, Norms, Leadership, Corporate Governance, Incentive Compensation, Informal Institutions, Intangible Assets, Valuation, Finance, Risk-taking, Short-termism, Myopia, Innovation, Firm Value, Productivity, M&A valuation, Integrity, Trust, Ethics, Compliance, Earnings Management

JEL Classification: G3, Z1, D23, G23, G30, K22, M14, O16