Embedding Culture: Why remuneration is your most powerful strategic lever

Private equity investors are increasingly recognising that the success of their investment thesis depends as much on culture as on operational performance. Recent discussions among PE boards and operating partners have highlighted that even the most detailed playbooks, growth targets, or process improvements can be undermined if culture and incentives are misaligned. Strategy sets the direction, but culture and pay determine how fast and how well outcomes are delivered.

The Remuneration Committee’s Cultural Mandate (Linked to UK Corporate Governance Code 2024)

A modern RemCo should govern remuneration as a behaviour-shaping system, not a compliance checklist. The UK Corporate Governance Code 2024 emphasises that boards are responsible for ensuring purpose, values, and culture are aligned with strategy, and that remuneration reinforces this alignment:

• The board should establish the company’s purpose, values, and strategy, and satisfy itself that these and its culture are aligned (Principle B).
• The board should ensure that workforce policies and practices are consistent with the company’s values (Principle E).
• The board should assess and monitor culture and how the desired culture has been embedded, including an explanation of its approach to investing in and rewarding its workforce (Provision 2).
• Executive remuneration should be aligned to company purpose and values, and clearly linked to the successful delivery of long-term strategy (Principle P).
• The board should review workforce remuneration and related policies, and the alignment of incentives and rewards with culture, taking these into account when setting executive director pay policy (Provision 33).

Together, these provisions establish the Remuneration Committee’s cultural mandate: to ensure that pay and reward systems not only meet compliance standards but actively shape behaviours, reinforce cultural priorities, and sustain long-term value creation.

Applying Governance Principles in Portfolio Companies

While the UK Corporate Governance Code formally applies only to UK-listed companies, PE-backed portfolio companies are not exempt from its lessons. Even in private companies, boards can voluntarily adopt the Code’s principles to strengthen governance, align culture and pay with strategy, and reinforce long-term value creation. Applying these principles ensures that executive remuneration, workforce policies, and incentive structures support the desired culture, de-risk investment outcomes, and prepare the company for future fundraising, IPO, or exit scenarios. Voluntary adoption of Code-aligned practices is increasingly regarded as best practice in private equity.

Strategic Steps for Embedding Culture

To embed a culture that accelerates successful strategy implementation and creates lasting value, organisations need a structured approach, starting with understanding the current culture:

1.Understand Your Lived Culture

Culture lives in behaviours, decision-making, incentives, and everyday practices – far beyond values statements or employee surveys. Mapping the current state identifies where culture supports performance and where it works against the strategy.

Key questions:

• Are you confident your culture accelerates, rather than slows, strategy execution?
• How closely does what is said about culture in the boardroom match employees’ lived experience?
• Do your remuneration structures reinforce the behaviours you want, or unintentionally reward the wrong ones?

Tailored diagnostics provide a structured lens to assess alignment between lived behaviours, stated values, and strategic priorities, giving boards and leadership teams clear, actionable insights.

2.Define the Desired Culture

Boards and leaders must articulate a culture that is both aspirational and practical. Defining the behaviours, norms, and mindsets that deliver results allows leaders to focus energy, target interventions, and measure progress.

3.Reinforce Through Pay and Oversight

Pay and oversight are powerful levers for embedding culture. Well-designed remuneration systems reward both outcomes (what) and behaviours (how), while reinforcing intrinsic motivators such as autonomy, mastery, and purpose. Boards and leaders must monitor progress, holding the organisation accountable to its cultural commitments. Misaligned incentives or weak oversight can quickly undo other efforts.

Conclusion

Culture is a value creator. Private equity-backed organisations that intentionally:

• Understand their lived culture,
• Define the desired state,
• Reinforce through pay and oversight

…set themselves up for lasting success. A holistic, disciplined approach embeds a culture that accelerates strategy and creates enduring value.

If you’re interested in how MM&K could help align leadership, culture, and pay, please contact Tamsin Howells (tamsin.howells@mm-k.com  or Stuart James (stuart.james@mm-k.com).

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