Building an ethical culture: Leadership's role in corporate integrity
Much of the time, a single moment or lapse in judgment does not precipitate a crisis. Instead, corporate scandals tend to spring from systemic failures in corporate culture, specifically around ethics.
However, within many organisations, ethics are often discussed in theoretical terms — lofty yet nebulous aspirations or nice-to-haves. This opaque approach to principled behaviour belies the clear consequences of its absence: diminished stock prices, dinged reputations, scrutiny from regulators, and in extreme cases, criminal judgments.
Given its potential for harm, organisations may not be giving ethical risk the attention it deserves, particularly from the top down. In a 2024 survey from the Society for Corporate Governance and Deloitte, 48 per cent of respondents reported that their boards of directors provide no dedicated oversight of corporate culture. Of those that do watch culture, many monitor whistleblower complaints or hotline reports, meaning they might step in after an ethics issue has already emerged. Only about one-third of the subset are more proactive, whether analysing employee surveys around ethics programs or benchmarking their organisation's ethics efforts against their peers.
The prevalence of social media and the rapid adoption of AI, particularly generative AI, exacerbates ethical risk, since harm from a lapse can hit harder and spread faster than ever. It is no longer enough to respond wisely to an adverse event. Organisations need to be proactive, sense risks before they emerge, and move quickly to head off potential crises. The capabilities needed to effect and enforce ethical behaviour cannot be developed overnight; they must be modelled by leaders and embedded into the fabric of the organisation.
Instilling an Ethical Culture
Employees make many choices every day that have ripple effects. Whether they respond ethically when pressured to achieve a sales goal, satisfy an unhappy customer, or meet investor expectations largely depends upon how tightly ethics are woven into the broader corporate culture and cascaded throughout the organisation. In ethical leadership, the CEO —perhaps with board input — sets the tone. The rest of the C-suite amplifies it. Then business unit leaders, supervisors, and managers instil it in employees. The result: an ethical culture.
To help build an ethical culture, leaders can adopt practices in four primary areas:
Ethics Expression. Ethical standards should be communicated clearly, along with what is expected of employees. Messaging should express how the organisation upholds its values and how it will respond when rules are broken. Set from the top down, the tone should foster an environment where ethical behaviour is the norm and unethical actions are discouraged. Cadence matters, too. Consistent and frequent messaging not only aids retention but also demonstrates the organisation's commitment to prioritising integrity. Executives, starting with the CEO, should lead the way in communicating that integrity matters above all else and it is everyone's responsibility. Messaging vehicles may include all-hands meetings, town halls, and enterprise-wide announcements as well as more targeted discussions and presentations.
Ethics Engagement. Employees need to understand the implications of their actions, how to navigate complex situations, and how to make choices that are in the best interest of the organisation and its stakeholders. They also need to understand how to comply with laws and regulations. This comprehension is rarely innate. Training programs and learning opportunities should be made available at all levels. Leaders should set expectations immediately with new hires and reinforce them periodically. Workers being promoted or transferred to new business units may need additional development. Training should cover realistic ethical dilemmas, bringing timely and relevant scenarios to life while also highlighting emerging risks. Learning can be reinforced by incorporating ethical considerations into project design, implementation, and debriefs.
Ethics Empowerment. It is not enough to centre on the code of conduct to instil confidence in employees to speak up. Employees need an environment in which they can report violations and get help with ethical dilemmas without fear of retaliation. Organisations should establish multiple safe channels for surfacing concerns so they can be addressed early. These channels may include speaking with a supervisor, manager, or other leader; consulting with HR or talent functions, or ethics team members; or calling a helpline that allows for anonymous reporting. Offering multiple options makes it easier for people to find the approach that is most comfortable for them and most appropriate for the situation.
Ethics Evaluation. The ethics landscape is constantly changing. To keep pace, organisations should periodically assess their ethics programs to identify trends, evaluate new risks, and make sure the messaging still resonates. Assessment activities may include interviewing stakeholders, conducting internal focus groups, and benchmarking ethics initiatives with leading practices. Formalising leadership performance goals can also help to gauge program effectiveness and promote positive outcomes. Holding leaders accountable for communicating and modelling ethical behaviour engenders trust and influences the tone at the top, which feeds back into ethics expression. Also, the CEO and other leaders may wish to recognise employees who have taken personal risks to uphold the organisation's values and consider ways to reward ethical behaviour by embedding it into performance criteria.
Sending the Right Signals
When pressed, employees often reach for what feels familiar — for what has been modelled and normalised. What have employees observed about how their peers, managers, and leaders handle conflicts or ethical dilemmas: Are there negative consequences for delays or extra expenses in the name of safety, or are those actions accepted, even applauded? Are suggestions for cutting corners indulged, or is there zero tolerance? Do people massage reports to meet targets, or do they report transparently, look for root causes, and find ways to improve?
Such cues guide decisions. Strong ethical leadership can help the organisation send the right signals. By creating a value-centred culture, leaders can help equip the organisation to head off ethical breaches before they happen and to respond swiftly and effectively — and yes, ethically — when they do.
Lori Pressler is chief ethics officer, and Michael Rossen and Miira Velia, are both managing directors, all with the US Ethics Office, Deloitte LLP.
As published by the Deloitte US Chief Financial Officer Program in the 30 April 2025 edition of The CFO Journal in WSJ.
Disclaimer
This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser.
Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ('DTTL'), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as 'Deloitte Global') does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the 'Deloitte' name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.
Copyright © 2025 Deloitte Development LLC. All rights reserved.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
ABC News
an hour ago
- ABC News
Artists in limbo as music labels negotiate content use by generative AI
Skip to main content Arts Law Centre chief executive Louise Buckingham says there could be major implications, especially for smaller artists, over how negotiations between AI startups and major music companies play out. #ABCBusiness
News.com.au
an hour ago
- News.com.au
‘Breakdown': Kelly Clarkson left tormented over huge personal decision
Kelly Clarkson has allegedly had a 'breakdown' on the set of her variety talk show, The Kelly Clarkson Show, as she grapples with a huge decision behind the scenes. Clarkson has recently been at the centre of rumours that she's planning to quit the show when her contract with NBC ends next year. The Since U Been Gone singer has reportedly been struggling with the idea that quitting the show would leave hundreds of her employees without a job in the midst of a cost of living crisis. Two staffers on the show told Daily Mail that Clarkson has been 'tormented' by the decision she has to make and it's impacting her behaviour on set. 'She's made it very clear that she doesn't want her decisions to affect all of our livelihoods … but it's a bit late for that now,' said the anonymous staffers. 'I get that she's conflicted, but when she says things publicly, it makes the public feel like she doesn't want to be here. And if she doesn't want to be here, why should they tune in?' They claimed that Clarkson has been sat down with show bosses in a bid to hash out a plan for the show's future, but that the meeting ended with the singer melting down. 'She was emotional. She was worried about the staff and had a bit of a breakdown about it,' they said. The latest reports come weeks after it emerged the show bosses were scrambling to try and keep Clarkson on the show. 'Kelly's number one priority is her children, and they always will be,' one industry insider told Page Six of the Texas native. 'The show is gruelling. It's a whole lot of work and I hear that Kelly would like to spend more time down South.' It's thought Clarkson is hoping to get back to focusing on her family as well as her music career, which has had to take a back seat due to her demanding schedule on the show. While singing at an arena in Atlantic City recently, Clarkson told the audience: 'We haven't done a show in a while, y'all, 'cause I have a talk show. It's like a whole other job.' 'We are bummed 'cause we love doing shows, and it's hard to fit it in, so it's cool when it does work out with the schedule,' she added, 'and it's cool to get to see your faces and feed off y'all. Thank you so much for having so much energy.'
News.com.au
2 hours ago
- News.com.au
Elon Musk lashes out as he digests his ‘betrayal' at the hands of Donald Trump's circle
Amid a flurry of furious tweets from Elon Musk, denouncing the current centrepiece of Donald Trump's agenda, came one with particularly telling language. 'In November next year, we fire all politicians who betrayed the American people,' Mr Musk posted, referring to the congressional elections of 2026. Betrayed. There's a loaded word. One that says more about Mr Musk's sorely bruised ego, I suspect, than the American government's long-complacent tax and spending policies. The man is neither talking nor acting like someone offended, on an intellectual level, by the betrayal of faceless voters he doesn't know. Rather he sounds like someone who feels he has been betrayed on a personal level. And you know what? For good reason. As perverse as it feels to offer sympathy for a guy who's never had a jot of it to spare for anyone else, you must concede that Elon's sense of grievance here is understandable. Trump gladly took hundreds of millions of dollars from Elon last year. Gave him a few shoutouts on stage. Threw him a token job in the government. Shoved him out the door after less than five months. And is now spitting on everything he was trying, however clumsily, to achieve in that job. You don't need to be a ten-year-old trapped in the ketamine-addled body of a 53-year-old tech billionaire to empathise with his frustration. At issue here is a piece of legislation called the One Big Beautiful Bill Act. Yes, that is its real, formal name. And yes, adults with long and, in some cases, even quite serious careers in politics signed off on it. The Trump family's branding instincts remain as subtle as ever. The moniker is at least two-thirds fitting though, because this thing is huge and near all-encompassing. The third element, beauty, remains in the eye of the beholder. It runs to more than a thousand pages, some of which some members of Congress did actually bother to read before passing it through the House of Representatives. It still needs to survive the Republican-controlled Senate before it can be sent to Mr Trump's desk for a final signature which, presumably, shall not be affixed via autopen. What of the contents? There are many. At the topline level: an extension of the sweeping tax cuts from Mr Trump's first term; big cuts to initiatives like Medicaid, the government program that funds health insurance for low-income Americans; and a humungous chunk of funding for immigration enforcement initiatives, like the border wall Mr Trump has been promising to build, quickly, since 2015. Some of us are old enough to remember when Mexico was going to pay for the thing, which would negate the need for any US government funding. Ah well. Empty promises. Elon is not the only person becoming acquainted with them. I digress. The problem with Mr Trump's Big Beautiful Bill, Mr Musk argues, is the effect on America's already drowning federal budget. According to newly released costings from the nonpartisan Congressional Budget Office – the equivalent of our Parliamentary Budget Office in Australia – the legislation as written will add nearly $US2.5 trillion to the country's debt over the next decade. Not million. Not billion. Trillion. It blows a gaping hole in the nation's budget, which already looked a bit like off Swiss cheese. Another cost, which admittedly concerns Mr Musk far less, is an estimated 10.9 million people being left without health insurance. Not exactly something to celebrate in a country where common injuries and ailments often bankrupt entire families. Now, as you would expect of a mature government, the White House and senior Republicans have offered a thoughtful response to the CBO's analysis: 'Nuh-uh.' They claim the CBO is biased against them, you see, like every other institution in the country. Hence, the assertions we are hearing, from those Republicans that this bill actually won't add a single dollar to America's deficit. Not one! Not a dime. The argument is that Mr Trump's extended tax cuts will spur a sudden, miraculous explosion of economic growth that wipes out any lost revenue. And that, when said growth is combined with the money raised by Mr Trump's on again, off again, on again, off again, on again (but at a lower rate), off again, on again tariffs, the budget will be fine. In politispeak, we might call this position tenuous. In real world speak, we call it obvious, utter crap. The Trump administration is building its tax and spending plans atop a house of cards, atop another house of cards, atop a house of tissue paper, all of it underpinned by assumptions that insult the Trump officials' own intelligence, never mind ours. Which means the Trump administration is, essentially, just continuing business as usual in Washington. Talk a humungous game about the importance of fiscal rectitude while out of office. Wag a finger at the profligate left. Then, once you've gained power yourself, run the nation's finances even more recklessly. It's a proud Republican tradition at this point. Deficit spending on a social safety net? Grossly irresponsible. Ballooning the deficit to provide lower taxes for the wealthy? Something something good economic management. No wonder someone like Elon Musk, the living embodiment of 'move fast and break things', is so frustrated. The poor guy believed he was part of something revolutionary. When Mr Trump tapped him to head the Department of Government Efficiency, he thought he was there to actually achieve something. Putting aside the chaos and stupidity of DOGE's methods – firing people only to rehire them in a scramble, repeatedly revising its savings down after being caught using false numbers, etc – Mr Musk's commitment to the vision, the ultimate end goal of a more fiscally balanced federal government, was at least genuine. Then he showed up for work in the White House, and swiftly learned none of the other acolytes hanging around the place cared about it. On one level, he was preposterously naive. Donald Trump ranted about the federal deficit during his first run for president almost a decade ago, and repeatedly claimed he would fix it easily. He went on to run massive deficits throughout his first term. How on earth did Mr Musk come to believe that guy would actually commit to balancing the budget? His own social media platform's juiced algorithm may have been a contributor. But the rest of Washington must have shocked Mr Musk as well. Consider: even the more principled members of the Republican caucus, the fiscal hawks, the libertarian small government types, are hardly standing athwart history shouting 'no' here. 'While I oppose increasing the debt ceiling by $5 trillion, I enthusiastically support making the tax cuts permanent and could vote for the Big not-yet-Beautiful Bill if the debt ceiling were voted on separately,' Senator Rand Paul, a quasi-libertarian, said today. A position as substantive as one's stool after a night of booze and curry. He's opposed to swelling the debt too much at some point in the future. Think of the carte blanche you might give the Democrats, if the ceiling of potential debt is raised! But at the same time, he's just fine with the tax cuts that are forecast to supersize said debt by trillions right now. Mr Paul probably would have been part of a Senate majority without any intervention, in last year's campaign, from Mr Musk. But you can mount a plausible argument that none of the jokers currently running America's executive branch would have attained this level of power without Elon Musk's money, or his cultural influence, or his platform. And what did he get for it? Barely four months inside the administration, running an ineffective quasi-department, whose work has been undone by a single bill. The implicit mockery of people who pretended to think he was a genius when it suited them, only to consciously uncouple at the first opportunity. So much time was spent, in these early months of the Trump administration, worrying about Mr Musk using the White House to further his own business interests. Not without reason. It turns out the Trump team was using him all along.
