The warning signs are all too familiar: whistleblowing channels clogged with fear, boardrooms detached from reality, and short-term profit motives eclipsing long-term resilience. Despite decades of talk about ‘tone from the top’, organisations around the world continue to stumble when it comes to ethics.

“When it goes wrong, it was never quite right,” says Nisha Sanghani, a respected senior governance professional who has advised multinational organisations across Europe and the Middle East. “Even in organisations where ethical behaviour should be the de facto standard, we still see systemic failures. Where this occurs, it’s usually across the board."

Public scandals, from financial misreporting to workplace misconduct, underscore how fragile corporate cultures can be when leadership fails to embody its values. Sanghani argues that boards and executives must move beyond rhetoric to embed ethical standards into the mechanics of decision-making.

That well-worn phrase ‘tone from the top’ is often used as shorthand for culture. But, as Sanghani points out, too many boards treat it as a slogan rather than a responsibility: “The culture of an organisation is set very much by its leaders. Boardrooms think their job stops at navigating strategy and delegating responsibility. It doesn’t. Oversight, risk management and ensuring open channels of communication are just as critical.”

She warns of two extremes:

• founder-driven companies where fear of powerful personalities silences dissent; and
• detached boards that fail to notice problems bubbling under the surface.

Both, she says, erode trust and make escalation nearly impossible.

For her, the antidote is balance: “Boards are not expected to press every button in the organisation. What they can do, however, is to build a culture of shared values. When employees understand those values, they’re more likely to speak up when something’s wrong.”

Profit versus principles

Balancing commercial pressure with ethics remains one of the hardest challenges. Sanghani acknowledges the reality: “Of course businesses need to make money. But if you’re only focused on short-term profitability, you’re being short-sighted.”

She points to reputational risk and resilience as equally important. “We’ve learned in the last 20 years that long-term profitability depends on managing risks and aligning risk management to strategy, whether that’s a downturn, a shift in demand, or reputational fallout. Boards that ignore this are gambling with the future.”

This approach requires a new skillset at the top, she argues. “We’re good at ticking boxes: finance, audit, risk. But where’s the EQ [emotional quotient]? Where’s the ability to read situations that don’t fit the template? We need that now more than ever.”

Avoid tick-box compliance

Too many companies equate ethics with compliance, reducing culture to a checklist. That, Sanghani warns, is a mistake. “I’m really against linking culture purely to compliance, risk, or employee engagement surveys. It becomes a tick-box exercise and doesn’t filter through the organisation.”

Instead, she describes a “golden thread” linking governance, risk, values, and strategy. Consistency, she emphasises, is key both in messaging and in consequences when rules are broken.

Sanghani recalls one client who mistook rising employee engagement scores for cultural health. “They thought everything was improving. But no change was made to the underlying business model and, even worse, ineffective managers were left in place. In fact, the problem got worse by focusing on increasing the engagement scores of poor performers. Engagement surveys are a tool, yes, but just one tool.”

Identifying hidden risks before they explode into scandals is all about employing professional scepticism. “Look at the Post Office case. If there’s a repeated pattern of events, you have to ask questions. It doesn’t matter if the person to your left is ignoring it. You’re accountable.”

That accountability, she says, should be built into risk oversight frameworks. “Boards need to understand their universe of risks – both principal and emerging – and challenge the information they receive. Without that, you’ll never spot the grey areas where non-ethical behaviour thrives.”

Look beyond complaints data

How should boards measure the efficacy of ethics policies? Many rely on whistleblowing statistics, but Sanghani warns against taking them at face value. “Yes, look at complaints data, but don’t stop there. Boards need to ask: what patterns am I seeing? More importantly, what am I not seeing? Saying ‘no one told me’ is not good enough any more.”

She cites a case where aggressive sales tactics led to a flood of customer complaints. None of that data reached the board. “In the past, a board could claim ignorance. Today, that excuse doesn’t hold. If you’re in that seat, it’s your job to ask for the missing information.”

Even when boards set the right tone, middle management can distort or dilute the message. And that gap is often overlooked, she says. “The board has a duty to evaluate the effectiveness of its executive and management teams. Many don’t. Governance structures matter. Too often, management drives the board agenda when it should be the other way around.”

Should companies ever walk away from profitable opportunities that clash with their values? “Most people see it as a binary choice. But often it’s because they don’t want to spend the funds to make it legitimate.”

She describes a client entering a new market without adequate operations on the ground. “They put their head in the sand. A sensible board would say: fine, we’ll take that risk for now, but once the business grows, we’ll reinvest in proper infrastructure. That’s grown-up decision-making.”

There are, however, red lines. “If a supplier is using unethical labour practices, that’s a hard no. But most situations sit in the middle and require grown-up choices. Document the risks, measure them, have a reasonably set risk appetite and, perhaps most importantly, act when the inflection point comes, before the risk exceeds your tolerance.”

Culture, Sanghani says, is not an abstract aspiration, but a practical system. “Culture isn’t built overnight. It’s the mechanics of how an organisation works – risk, governance, values, strategy are all linked. Boards that understand this won’t just avoid scandals. They’ll build businesses that last.”