SSGA to evaluate culture of investee companies

The asset manager's focus follows a warning from Willis Towers Watson that measuring corporate culture is notoriously difficult

State Street Global Advisors has written to 1,120 public companies around the world, advising them that it intends to judge them on the strength of their corporate cultures.

In a letter signed by Cyrus Taraporevala, president and chief executive officer of the fund firm, it said it would be looking at corporate culture in 2019 as one of its indicators of the future success of a company’s long-term strategy.

Accompanying the letter was a document entitled Aligning Corporate Culture with Long-Term Strategy, in which SSGA offered a handful of metrics monitored by other companies. It suggested that these may indicate good company cultures and, potentially, therefore, a healthy long-term strategy.

The suggested metrics include monitoring levels of employee turnover, feedback from employee satisfaction survey results, diversity & inclusion approaches, and pay differences between employees.

SSGA’s announcement is a bold move, given that consultant groups have recently warned of the difficulties of accurately measuring a company’s culture.

In October, consultant Willis Towers Watson published a research paper looking at the corporate culture of asset managers, in which it warned that measuring corporate culture “can be complex, subjective and open to interpretation.”

In the paper, the consultant warned that investors looking to assess corporate culture could miss red flags or threats to a company’s long-term sustainability if they do not know the right questions to ask.

Despite the complexity of the issue, SSGA’s president and chief executive believes it is a metric worth including, when assessing corporate behaviours.

“We believe that this is a material issue that must be addressed by companies and investors,” Taraporevala said. “By engaging on this topic in a more rigorous and structured way and by elevating these issues to boards, we believe we can help improve the overall governance quality of listed companies over the long term.”

The companies targeted in the letter are listed on the S&P 500, FTSE 350, DAC 30, CAC 40, ASX 100 and Topix 100.