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”

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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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