Corporate Culture Is Set Early—and It Is Harder to Change Than We Think

When companies struggle, boards often reach for a familiar remedy: appoint a new CEO, rewrite the values statement, or reorganize the business. The underlying assumption is that corporate culture can be reset from the top.

In our working paper, “Set in Stone: The Persistence and Origins of Corporate Culture,” we suggest a more sobering conclusion: corporate culture is remarkably durable. It is not a reflection of the preferences of the current CEO, nor is it something that disappears after a merger or a crisis. Instead, culture appears to be built into an organization early in its life, and then sustained because the company tends to attract, select, and retain people who fit it.

What Do We Mean by Culture?

Corporate culture is often discussed in vague terms. Here, it means the shared values and unwritten rules that shape how people behave when contracts, policies, and direct supervision cannot tell them exactly what to do. 

These values matter because business decisions rarely come with a complete instruction manual. Employees and managers constantly face ambiguous situations: whether to speak up about a problem, how to respond to a customer, or how to balance speed against quality. In those moments, culture can guide decisions when formal rules offer no clear answer.

To study culture at scale, we track corporate values across thousands of large U.S. firms over more than two decades. We use machine learning to measure five values: innovation, integrity, quality, respect, and teamwork, in earnings-call transcripts, and validate our findings using millions of employee reviews.

The central finding is striking: most measurable variation in culture comes from the firm itself, not from its CEO.

Looking only at CEOs who move between companies makes the contrast particularly clear: the firm accounts for an even larger share of the variation, whereas the CEO accounts for an even smaller share.

In other words, companies have cultural identities that tend to outlast their leaders.

The Founder’s Long Shadow

If culture is so persistent, where does it come from?

A natural place to look is the founder. The culture a firm displays early in its public life strongly predicts its culture many years later. This relationship does not vanish simply because the founder is no longer CEO or no longer serves on the board.

We also find that founders’ backgrounds are related to their companies’ initial cultures. Firms founded by people whose cultural heritage places greater value on avoiding uncertainty tend to have stronger cultures. Founders born in more racially diverse places also tend to build stronger initial cultures. By contrast, founders who entered the workforce during a recession tend to establish weaker cultures.

These results highlight a broader point: people carry formative experiences, including their values, into the organizations they create. 

Why Culture Survives Leadership Change

If CEOs do not simply impose a new culture, why does culture persist as people come and go?

The answer appears to lie in who firms hire and who stays. Companies tend to select leaders whose values fit the organization, while those who do not fit are more likely to leave.

We examine more than 3,200 CEO turnovers. Firms with stronger pre-existing cultures are more likely to appoint CEOs whose underlying attitudes toward uncertainty align with the firms’ cultural characteristics. When an unexpected CEO departure gives the board less time to find an ideal successor, a larger mismatch between the new CEO and the firm’s established profile predicts a greater likelihood that the CEO leaves within one or two years. We find a similar pattern among employees.

This makes culture self-reinforcing: companies hire people who fit their norms, retain those who fit, and lose those who do not. Culture persists because organizations continually select people who are compatible with it.

The Governance Lesson

For boards, investors, and policymakers, the message is both practical and uncomfortable: changing a CEO is not the same as changing a company’s culture.

Boards should assess a CEO candidate’s skills, track record, and strategic vision. But they should also ask whether the candidate fits the organization’s underlying values, and whether that fit is desirable. A cultural mismatch can be productive when a company truly needs transformation, but it is unlikely to be painless or quick. 

A new leader can influence culture, but lasting change requires changes throughout the organization. Without corresponding changes in hiring, incentives, internal processes, and everyday practices, replacing the CEO alone is unlikely to transform the company.

Kai Li is a Professor of Finance at the UBC Sauder School of Business, and an ECGI Research Member. 

Yu-Jane Liu is a tenured Professor of Finance at the Guanghua School of Management, Peking University.

Ruichang Lu is an Associate Professor at Finance Department at the Guanghua School of Management, Peking University.

Kaihao Qian, Peking University.

Xiaojun Zhang is an Associate Professor of Accounting at Guanghua School of Management, Peking University.

This blog is based on a paper presented at the Corporate Governance Academic Forum at the University of Toronto with ECGI, held on 2 October 2026. Visit the event page to explore more conference-related blogs.

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