In corporate life, there is a strong emphasis on senior leadership setting the standard for the rest of the organisation to follow. The concept of “tone from the top” has a commendable idea: if the rest of the board, management, and employees observe the excellent behaviour set by the company’s leader, everyone else in the organisation will understand and follow their beliefs and example.
In a similar vein, the CEO’s “positive” actions to eradicate “bad” business practices and their efforts to advance important issues like diversity, ethics, sustainability, and corporate governance will encourage everyone else in the organisation to view these issues similarly and act accordingly.
Research repeatedly demonstrates that CEOs and other C-suite members do not set the standard for others to follow. This is especially true when you look at the many corporate governance scandals that executives are ultimately held responsible for and their huge pay packages that have nothing to do with other employees’ salaries (about 200 times the average worker’s pay in the United States), the company’s performance, best practices, or even common sense.
Furthermore, CEOs’ actions don’t always align with the behaviour they are supposed to promote; rather, they frequently reveal attitudes that they believe are acceptable (at least to themselves) but that are at odds with the values of a progressive society.
According to Robert Ordever, European managing director of workplace culture and recognition specialist OC Tanner, “Every leader sets the tone, whether they intend to or not.” They establish standards for what is appropriate through their words and, more significantly, their deeds. The discrepancy between leadership behaviour and company rhetoric is the risk area.
The tower of ivory
Many recent instances show how some company leaders have a terrible moral compass and/or a ridiculous lack of self-awareness. For example, despite Starbucks’ claims to be a leader in sustainability, the recently appointed CEO, Brian Niccol, has come under fire after it was disclosed that he will travel nearly 1,000 miles via business aircraft from his house to the company’s headquarters in Seattle.
In August 2024, Chris Ellison, managing director of Mineral Resources, an Australian mining company, complained that workers who go out to buy coffee, instead of getting one at work, are costing the company too much money.
During a financial results presentation, Ellison expressed his desire to “keep staff captive all day long.”
Bill Michael, the UK chairman of Big Four firm KPMG, was forced to resign in February 2021 after his motivational speech to staff members during a virtual meeting went awry (and went public) after he referred to unconscious bias as “complete crap” and told them to “stop moaning” about the effects of the COVID-19 pandemic.
Jes Staley, the CEO of Barclays Bank, resigned that same year after a UK financial regulator’s probe turned up a cache of emails indicating he had a closer association with paedophile and notorious businessman Jeffrey Epstein than he had disclosed.
A seldom applied discipline, the Financial Conduct Authority (FCA) fined him £1.8 million two years later and prohibited him from holding a senior management position in the financial services sector. When Staley attempted to expose a whistleblower who had concerns about his prior job history, the FCA had already slapped him across the knuckles.
Given these instances, it’s not surprising that some experts believe the concept has limitations.
Diane Newell, managing director of coaching consultancy OCM Discovery, states that “the tone from the top works in practice all the time, but whether the tone that is being set in practice is the one that we might choose is a different matter.”
She goes on to say that it is “never going to be an exact science” to control how people perceive and comprehend the actions of executives.
Higher standards
The idea of corporate and executive accountability, as well as the way that leadership is perceived, has evolved during the last ten years, which contributes to the issue.
According to Piers Rake, a partner at the legal services firm Astraea, “The board and C-suite of any organisation need to recognise that expectations around conduct and culture have changed and increased.”
He claims that whereas shareholders, consumers, and employees were the only major corporate stakeholders in the past, broader social forces “have resulted in heightened expectations from a wider cohort of interested parties.”
Activist organisations, “rights holders,” or individuals potentially harmed by the company’s operations could be among these parties. Rake cautions, “Businesses that engage in completely lawful operations that are viewed as inconsistent or at odds with broader societal trends are more likely to face adverse or negative press.”
Liz Sebag-Montefiore, the director of HR consulting firm 10Eighty, asserts that staff members actively seek and expect strong, moral leadership, prioritising actions over words.
“A company can talk about ethics, but if they are treating customers unfairly, gouging their suppliers, and exploiting employees, they won’t inspire a workforce committed to best practice,” she said.
Having said that, is it time to abandon the “tone from the top” mantra? And if so, what ought to take its place? And to whom should stakeholders and employees turn for improved leadership?
According to Melissa Hewitt, head of HR outsourcing at Morson Group, a recruiting firm, others can assist executives in carrying out their responsibilities as moral leaders. Because “company culture and values are part of their remit,” she thinks there is a compelling case for the HR director to be promoted to the board.
However, she also thinks regulators should do more to establish clear guidelines for industry leaders.
In the end, she acknowledges that commercial factors—rather than ethical ones—may be the most significant short-term influencer because Gen Z recruits, who are generally those born between 1996 and 2010, are more likely to depart if they believe the company is not meeting corporate best practice standards, leaving businesses with a skills gap that may be difficult to close.
Is there space at the summit?
There is already a move away from concentrating on a core group of CEOs to define expectations around ethical leadership, according to Sarah Miller, CEO of the ethics advice firm Principia.
She claims that, in part because it is such a dangerous strategy, “relying on a small group of executive leaders to shape, champion, and model the tone and tenor of a culture is increasingly the exception, not the norm.”
“It is better to share the responsibility with more, not fewer, people in the organisation, which means relying on middle management,” she adds, adding that increased scrutiny and higher expectations increase the likelihood of failure for a select few top executives.
“With an understanding that it is not only the executive team that needs to consistently reinforce and apply hallmark cultural attributes, many companies are also focusing on values activation and ethical decision-making skills for the top 100 people. This can still be considered the ‘top,’ but in a much broader, more diffused sense than the term has tended to apply to,” she said.
As per Miller, this tendency is “encouraging” since it will have a far greater and more profound effect on a larger group of employees to observe how middle and/or line managers handle moral quandaries and comprehend and follow the rules daily.
“Any day, especially in larger organisations, I would prefer to have a strong ‘tone in the middle,'” she said.
While some may recognise that the overall tone is inconsistent and requires reevaluation, it appears that most people are willing to keep using it, primarily because there doesn’t seem to be a better alternative available.
Kevin Gaskell, the chairman of the fibre broadband company ITS Technology Group and a former CEO of Porsche UK, asserts that while the “tone from the top” can be beneficial in practice, its effectiveness is heavily dependent on consistency, transparency, and authenticity.
He continues by saying that “it becomes difficult to imagine who else could effectively set the tone” if executives are not the greatest individuals to exhibit moral and appropriate leadership.
According to him, leadership is inherently hierarchical, and the attitudes and actions of the top executives in an organisation have a ripple effect on the entire workforce.
“There is a leadership void where misunderstandings, inconsistent behaviour, or unethical practices can readily proliferate if executives do not exhibit the moral principles or appropriate behaviours expected of them,” Gaskell continued.
According to entrepreneur and executive business coach Mike Greene, even some people who think a re-examination of the “tone from the top” is required do so “not for the reasons you might think.”
As per him, leadership is about making difficult, frequently unpopular decisions for the good of the organisation, not about being popular. He goes on to say that the practice of giving moral leadership to inexperienced majorities or feel-good committees is “dangerously misguided.”
Greene said, “Executives are not just accountable, they are essential. They possess the knowledge and power to negotiate challenging moral situations. It would be detrimental and shortsighted to lessen this obligation. It is foolish to believe that employee-led initiatives or middle management can successfully establish ethical standards.”
Instead of confronting prejudices, it frequently produces echo chambers of inexperience.
Greene requires “leaders unafraid of unpopularity, who understand that real-world ethics are not always clean-cut or politically correct,” and feels that “tone from the top” is effective when applied “with backbone, not as a PR exercise.”
Greene asserts that businesses need “experienced executives who are not afraid to take charge” to maintain moral leadership under real-world pressure. Keep in mind that, despite their softness and cuddliness, sheep require a shepherd and guard dog to keep them safe from wolves. Sell ice cream if you want to be well-liked.
The idea that corporate leaders set the ethical standard for organisations has long been upheld, yet real-world evidence suggests otherwise. Many CEOs fail to embody the values they claim to champion, often prioritising financial gain over integrity.
A broader cultural shift is required, where ethical leadership is embedded at all levels, particularly in middle management.
Companies must integrate ethical decision-making into their organisational fabric rather than relying solely on CEOs to dictate corporate values. If executives fail to lead with integrity, their authority to set the tone crumbles.
Instead of abandoning the concept entirely, businesses should expand ethical leadership beyond the C-suite, ensuring that values are upheld not just in words but in action.