Hong Kong: Change Management - Is Corporate Culture Important?

Last Updated: 21 May 2003

A Lighthouse Warning

In 2002, President Bush proposed revolutionary reform to US corporate governance legislation with the Sarbanes-Oxley Act, as a result of a succession of US scandals. In Hong Kong, there has been a call for administration of the HK Ex Listing Rules to be transferred to the SFC and to give the rules statutory backing, so that offenders can be fined rather than just reprimanded. The transfer would remove the conflict of interest that HK Ex faces between being a for-profit company and a regulator. It is clear to the international community that new steps need to be taken to safeguard shareholders’ and other stakeholders’ interests for the wellbeing of local and international economies. However, while governments play a central role in shaping the legal, institutional and regulatory climate within which individual corporate governance systems are developed, the approach of any organisation to corporate governance will be largely a function of its own corporate culture. Unlike Bush’s 10 Points or the HK Ex Listing Rules, the process is organic and dynamic. As the corporate culture of any organization is unique, so each organisation’s approach to corporate governance will be unique.

Enron. Anderson. OneTel. WorldCom. Over and over again, the neglected corporate culture has been named a key culprit for the demise of these major respected organizations, and this serves as a lighthouse warning to all. Insiders and experts talk about a lack of integrity, greed, back-stabbing and other degenerate values and behaviours. In recent times, although structural changes had been made to the way corporations are governed, most often these changes have not led to a more basic cultural change. Therefore, while new legislation will be of some help in creating the correct infrastructure, it is the culture of Board directors which is fast becoming a new yardstick, and integrity must lie at the heart of this.

Corporate Culture

One definition is that corporate culture is;

A pattern of basic assumptions, invented, discovered or developed by a given group, as it learn to cope with its problems of external adaption and internal integration, that has worked well enough to be considered valid and, therefore, is to be taught to new members as the correct way to perceive, think and feel in relation to those problems. (Schein, 1990)

As no two corporate cultures are the same it effectively is the organisation’s fingerprint, and is a key component of the corporate brand and image. Product, policies and processes can be copied by competitors, but not your people and how they deliver to other stakeholders. Corporate culture develops as an organisation grows and over time, the culture changes as faces change. In a well-established corporation, it will be so strong that even top management may not be able to re-align culture with strategy without support from key members of senior administration. Or if they try, it may take many years and it will be painful.

  • Effects of Toxic Corporate Cultures

The Enron collapse sent shockwaves through the financial world when it emerged that management had used off-the-books, unregulated private partnerships to absorb losses and support inflated revenues. When analysts questioned where the money came from Enron refused disclosure. Only under mounting pressure did they eventually comply and communicate its overstatement of profits in November 2001. This triggered the collapse of the company and its bankruptcy filing by 02 December, 2001. During investigations it emerged that Anderson, the Enron auditing firm, had supported the deceit by turning a blind eye to questionable accounting practices to secure lucrative consulting fees. A 217 page report by Enron’s Board condemned Enron’s management for inflated profit reports and failure of controls at every level. The report states the following:

`a culture emerged of self-dealing and self-enrichment at the expense of shareholders; accounts and lawyers signed off on flawed and improper decisions every step of the way’

The report criticises Enron’s long time Chairman and Chief Executive, Ken Lay, and his protégé Jeffrey Skilling who served as President and Chief Executive. Skilling set up a flawed system for self-enrichment and in that system Falstow, who served as Chief Financial Officer, also served as general partner of the partnerships. Oversight broke down. The impact went on to destroy Anderson who were convicted of approving the practices used by senior Enron executives to tamper with the books and dress the financial reports given to stakeholders. The old adage rings true. Be careful of the company you keep.

In her book 1 Barbara Ley Toffler, former partner-in-charge of Andersons “Ethics & Responsible Business Practices” consultancy practices from 1995 – 1999, named the cause of Anderson’s downfall succinctly:

`a corporate culture that put loyalty to the firm above loyalty to the client or the investing public’

When Arthur Andersen founded the company in 1913 his motto was “think straight, talk straight” and over time he earned a reputation in the marketplace for his integrity. However, by the 1990’s the Andersen culture had changed completely and, according to Toffler, it was all about money. Staff were applauded for the amount of money they brought in, but nobody was acknowledged and rewarded for standing up to unethical conduct as the founder had done. Self-interest triumphed over the interests of the larger population.

In a culture where Toffler felt like an outsider, like-minded recruits were sought on college campuses and trained in Andersen’s facility. “The loyalty of the partners was something akin to that of a military unit” she says and closing ranks to cover up questionable and illegal activities was expected. However these life-time employees, who referred to themselves as Androids, acknowledged that for the company to grow they had to hire outside specialists. Predictably, many specialists burnt out. Yet others simply chose not to fit in with the toxic corporate culture. In1999 Toffler wanted out and Anderson did not try to keep her. Reflecting on the 2002 corporate scandal which brought down the premier global accounting firm, Toffler says that Anderson’s senior administration acted blind to the dangers they faced until it was too late.

It is not plausible that all the “bad guys” reside together in the same corporations with the “good guys” existing on another plane. Most would concur that elements of a toxic corporate culture can be evidenced in any organization. World famous Swiss psychoanalyst Carl Jung has a view on why this occurs.

It is a notorious fact that the morality of society as a whole is in inverse ratio to its size; for the greater the aggregation of individuals, the more the individual factors are blotted out, and with them morality, which rests entirely on the moral sense of the individual and the freedom that is necessary. Hence everyman is, in a certain sense, unconsciously a worse man when he is in society than when acting alone; for he is carried by society and to that extent relieved of his individual responsibility. Society, by automatically stressing all the collective qualities of its individuals representatives, puts a premium on mediocrity, on everything that settles down to vegetate in an easy, irresponsible way. In a small social body, the individuality of its members is better safeguarded; and the greater is their relative freedom and the possibility of conscious responsibility. Without freedom, there can be no morality. And in so far as he is normally adapted to his environment, it is true that the greatest infamy on the part of his group will not disturb him, so long as the majority of his fellows steadfastly believe in the exhalted morality of their social organization.2

Jung correctly identified that the moral and spiritual essence of an organization is reliant on individual freewill and personal responsibility, and puts forward a strong case for the value of ethical leadership. Recently, the Sarbanes-Oxley Act `10 Points’ demands integrity in no less than three instances. Also, the demand in different global marketplaces, for more onus and personal responsibility to be put on directors for their actions, is a big step in the right direction. A healthy corporate culture has to start at the top, and must be cascaded through the organization with the right behaviours rewarded and irregular behaviours severely punished. Leadership and appropriate role-modelling are paramount so that the right tone is set.

  • Benefits and Outcomes of a Healthy Corporate Culture

On a positive note, there are and have been many reputable studies done on the positive impact of ethics in the workplace. Harvard Business School professors John Kotter and James Heskett studied the performance of 207 large firms over 11-years. In their findings, they wrote that corporate culture can have a significant impact on a firm’s long-term economic performance. The study found that organisations with cultures that emphasized all the key managerial constituencies, (customers, stockholders and employees) with leadership from managers at all levels, outperformed by a large margin organisations that did not. Over an 11-year period, the former increased revenues by an average of 682% versus 166%, expanded their workforces by 282% versus 36%, grew their stocks by 901% versus 74% and improved their net incomes by 756% versus 1%.

A case in point. In addition to winning the Platinum Category of the Hong Kong Society of Accountants “Best Corporate Governance Transparency Awards” 2002, HSBC Holdings Hong Kong achieved significant benefits and outcomes from the recent 2.5 year bankwide culture change programme which yielded a ROI of 606.3%.

“Together, We Win!” which is better known by its Chinese name “Chung Chi Sing Sing” (CCSS) encompassed 15,000+ staff from the Chairman to the most junior employee. The initiative was sponsored by the General Manager. A Steering Committee was established and chaired by the Assistant General Manager, to drive the programme with the CCSS Project Manager and ensure it was fully aligned with the Bank’s business strategy. The external cost of CCSS was HK$6.3 million over 2.5 years. 43,082 delegate days were delivered at HK$146 per day or HK$419 per person. The programme was designed with one aim and three objectives which cover major stakeholders:

Aim: To work together to embrace change and allow HSBC continuing success in the 21st Century
Objectives: To support implementation of the Bank’s strategic objective to continue to build shareholder value
To heighten levels of customer satisfaction
To improve staff satisfaction

CCSS Outcomes and benefits included:

Bottom Line: HK$33.8 increased revenue

Plus significant cost savings through line teams working smarter and measuring ROI locally, using hard and soft data and Q.M. tools provided by the change team. The bank’s profit performance has remained strong, despite the difficult economy and market conditions supporting the belief that a more satisfied team and more satisfied customers will lead to an improved profit.

Employee Attitude Survey: `Company Image’ which has a huge impact on brand value and shareholder value, topped the charts with a 15% improvement. Every category of feedback has improved.

The General Manager conducted a survey of staff perceptions in year 2000 before CCSS commenced and conducted the same survey at the end of 2002. The difference between the two surveys shows a statistically significant improvement on all 14 categories. In addition, the categories that were most improved were related to the areas covered by the CCSS initiative. The following percentages indicate the degree of improvement for the top six categories:

Company Image +15% Quality of Supervision +14%
Empowerment +14 % Customer Focus +14%
Working Relationships +12% Quality +10%

Continuous Learning & Embracing Change: 22.3% increased participation in Training & Development.

During the period of the programme, the number of attendees at training increased by 22.3% (excluding the CCSS Event and CCSS Leadership workshops). This signifies an increased desired to develop and embrace change in the workplace and move towards becoming a Learning Organisation.

Continuous Improvement: Value of suggestions implemented HK$16.1m.

The Bank operates a staff suggestion scheme for improvements in work practices. During the period of the CCSS initiative, the scheme evidenced an increase in the number of suggestions and the value of bottom-line improvements gained from those suggestions is as follows:

No. of Suggestions Implementation Value (HK$)
Year 2001 2202 6.7 million
Year 2002 7359 9.4 million

Customer Satisfaction: Every measure has increased. The highest level of improvement was 27%.

Customer satisfaction is measured by telephone Surveys and Questionnaires to existing customers. Over 7,000 customers are contacted each year to gain their views against 11 key service categories. The Bank also runs a Mystery Shopper programme to assess the reception given to an anonymous customer. They are therefore able to provide regular feedback to every Branch and the Call Centre on the quality of their service. Over the 2.5 years of the CCSS initiative there has been consistent improvement on all historical measures. The highest level of improvement was 27%.

Communication & Transparency: Average number of visits to the CCSS intranet 10,000 per month and rising.

The CCSS web-site has proven to be a popular form of internal communication. The number of visitors to the site has increased from a monthly average of 4,851 in 2001 to 7,166 in 2002 and 10,223 in 2003. The `Ask Top Management’ forum of the website has received 549 questions to date, all answered by top management within 10 days. The number of questions is a healthy sign of increasing dialogue and transparency on the issues that concern staff from across the Bank. As a result of these questions, the top team has made policy changes that have increased the welfare of staff and benefit to customers.

This enormous feat was achieved over 2.5 years in an economic environment where mergers, redundancies and pay-freezes and the demise of major organizations were all too common. Clearly corporate culture management is important and facilitates sound corporate governance.


In the traditional business model, the workforce is positioned at the bottom of the pyramid and is the first to feel the pinch when there is a keen focus on costs. “People related” initiatives are the first to be targeted, when the going gets tough. Yet reputable studies and best practices have proven that corporate culture can have a significant impact on a firm’s long-term economic performance. Organisations with cultures that emphasize all the key managerial constituencies, (customers, stockholders and employees) with leadership from managers at all levels outperformed, by a large margin, organisations that do not. Toxic corporate culture will over-ride policy and procedures to bend and twist them, and can ultimately destroy even well-established organizations, with strong brand image, overnight. A healthy corporate culture will differentiate an organization from the competition to create a sustainable difference and enhance value.

Gabrielle O’Donovan headed the successful culture change programme “Together, We Win” for HSBC, Hong Kong plus subsidiaries.

Copyright: Gabrielle O’Donovan 2003

1 Toffler, B. (2003), Final Accounting, Broadway Books

2 Jung, C.G. (1959), Basic Writings; Modern Library

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions