The focus on executive leadership setting the example for the rest of the organisation to follow is deeply ingrained in corporate life. The idea behind the concept of ‘tone from the top’ is laudable: if the rest of the board, management, and employees see the exemplary conduct set by the head of the company, the values and example they demonstrate will be understood and followed by everyone else in the organisation.
Similarly, the ‘positive’ actions the CEO takes to stamp out ‘bad’ business practices, as well as the efforts they take to promote key issues such as ethics, diversity, sustainability, and corporate governance, will inspire everyone else in the organisation to regard such matters in the same way and adopt the same behaviour.
But time and again the idea of CEOs and other members of the C-suite setting the tone for others to follow becomes risible, especially in light of a swathe of corporate governance scandals (which executives are ultimately responsible for) and enormous pay awards that bear no resemblance to other workers’ salaries (some 200 times a typical worker’s pay in the US), corporate performance, best practice, or even common sense. Nor does executives’ behaviour always chime with the conduct they are meant to champion: instead, it often exposes the attitudes they think are permissible (at least for themselves), but which are out of sync with progressive society.
“Every leader sets the tone, whether they intend to or not,” says Robert Ordever, European managing director of workplace culture and recognition specialist O.C. Tanner. “Their words, and more importantly their actions, set expectations as to what is acceptable. The danger area is the gap between corporate rhetoric and the actions of leadership.”
The ivory tower
There are plenty of recent examples to demonstrate the appalling moral compass and/or laughable lack of self-awareness exhibited by some corporate leaders. For instance, the newly announced boss of Starbucks, Brian Niccol, has come under fire after it was revealed he would commute almost 1,000 miles on a company jet from his home to the firm’s headquarters in Seattle – despite the company’s pronouncements that it is a sustainability leader.
The perception of leadership has changed over the past decade
Meanwhile, Chris Ellison, managing director of Australian mining firm Mineral Resources, said during a financial results presentation in August that he wants to “hold staff captive all day long” after he complained that employees who go out to buy a coffee (rather than get one at work) are costing the company too much money. In February 2021, the UK chairman of Big Four firm KPMG, Bill Michael, was forced to resign when his motivational speech to employees on a virtual meeting went off the rails (and went public) after he told staff to “stop moaning” about the impact of the Covid-19 pandemic and lampooned unconscious bias as “complete crap.”
That same year, Barclays Bank CEO Jes Staley resigned after an investigation by the UK’s financial regulators uncovered a cache of emails that suggested his relationship with disgraced financier and paedophile Jeffrey Epstein was closer than he had admitted. Two years later the Financial Conduct Authority (FCA) fined him £1.8m and banned him from serving in a senior management role in the financial services industry – a rarely used sanction. Staley had previously had his knuckles rapped by the FCA when he tried to out a whistleblower who raised concerns about his past employment history.
It is perhaps unsurprising that such incidents lead some experts to suggest the concept has its limits. “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,” says Diane Newell, managing director at coaching consultancy OCM Discovery. She adds that managing how people interpret and understand the behaviour that they see from executives and other senior leaders is “never going to be an exact science.”
Raised expectations
Part of the problem is that the perception of leadership has changed over the past decade, as has the notion of corporate and executive accountability. “The C-suite and board of any organisation needs to recognise that expectations around conduct and culture have changed and expectations have increased,” says Piers Rake, partner at legal services firm Astraea. Previously, he says, the principle corporate stakeholders were limited to shareholders, customers and employees, but wider societal pressures “have resulted in heightened expectations from a wider cohort of interested parties.” This may include “rights holders” – those who may be impacted by the business’ operations – as well as activist groups. “Companies are more likely to face adverse or negative press for entirely legal business activities where they are considered to be inconsistent or at odds with wider societal trends,” Rake warns.
Liz Sebag-Montefiore, director of HR consultancy 10Eighty, says employees want – and expect – strong, ethical leadership from the top, with a focus on actions rather than words. “A company can talk about ethics but if they are gouging their suppliers, exploiting staff, treating employees as disposable and treating customers unfairly, then they won’t inspire a workforce committed to best practice,” she says. With that said, should the ‘tone from the top’ mantra be scrapped? And – if so – what should replace it? And who should workers and stakeholders look to for better leadership?
Melissa Hewitt, head of HR outsource at recruitment company Morson Group, suggests others have a role in helping executives fulfil their roles as ethical leaders. She believes there is a strong argument for elevating the HR director onto the board role because “company culture and values are part of their remit,” while regulators should also do more to set clear parameters for leaders in their sector. Ultimately, she concedes that commercial – rather than ethical – factors may be the most important short-term influencer because Gen Z recruits (typically those people born between 1996 and 2010) are more likely to leave if they feel the organisation is not living up to expectations of corporate best practice, leaving companies with a skills gap they may find hard to plug.
Room at the top?
Sarah Miller, CEO at Principia, an ethics advisory firm, says there is already a shift away from focusing on a core group of executives to set expectations around ethical leadership. “It is increasingly the exception – not the norm – to rely on a small group of executive leaders to shape, champion and model the tone and tenor of a culture,” she says, partly because it is such a risky approach. With both higher expectations and greater scrutiny, she says, the chance of failure for a small number of top leaders becomes more concentrated and exposed, so it is better to share the responsibility with more – not fewer – people in the organisation, which means relying on middle management.
Employees want – and expect – strong, ethical leadership from the top
“Many companies are focusing on values activation and ethical decision-making skills for the top 100 people, with a recognition that it is not just the executive team that needs to consistently reinforce and apply hallmark cultural attributes,” she says. “This is arguably still the ‘top,’ but in a much more expansive, diffused understanding than the term has tended to apply to,” she adds. Miller believes this trend is “encouraging” because seeing how middle and/or line managers deal with ethical dilemmas and how they understand and abide by rules on a daily basis is going to make a much bigger and deeper impact to a wider range of workers. “I would rather have a strong ‘tone at the middle’ any day, particularly in larger organisations,” she says. While there might be an acknowledgment in some quarters that the tone from the top is flaky and needs rethinking, it appears that the majority are prepared to stick with it – largely because there does not appear to be anything better to replace it.
The devil you know
Kevin Gaskell, former CEO of Porsche UK and chairman of ITS Technology Group, a fibre broadband firm, believes the ‘tone from the top’ should work in practice, but its effectiveness “depends heavily on consistency, transparency and authenticity.” He adds that if executives are not the best people to demonstrate ethical and correct leadership, “it becomes difficult to imagine who else could effectively set the tone. Leadership by its very nature is hierarchical, and the values and behaviours of those at the top of an organisation trickle into the entire workforce,” he says. “If executives fail to embody the ethical standards or correct behaviours expected of them, it creates a leadership vacuum where confusion, inconsistency, or poor practices can easily spread,” Gaskell added.
Even some of those who believe a re-examination of the ‘tone from the top’ is necessary, do so “not for the reasons you might think,” according to Mike Greene, an entrepreneur and executive business coach. Leadership, he says, is not about popularity – it is about making tough, often unpopular decisions for the organisation’s benefit. The trend of deferring ethical leadership to inexperienced majorities or feel-good committees is “dangerously misguided,” he adds.
“Executives are not just accountable – they are essential,” says Greene. “They have the experience and authority to navigate complex ethical landscapes. Diluting this responsibility is short-sighted and potentially harmful. The notion that middle management or employee-led initiatives can effectively set ethical standards is naive. It often creates echo chambers of inexperience, reinforcing biases rather than challenging them.” Greene believes ‘tone from the top’ works when implemented “with backbone, not as a PR exercise” and demands “leaders unafraid of unpopularity, who understand that real-world ethics are not always clean-cut or politically correct.”
For ethical leadership that withstands real-world pressures, Greene says companies need “experienced executives who are not afraid to take charge. Remember: sheep may be soft and cuddly, but they need a guard dog and shepherd to protect them from wolves. If you want to be popular, sell ice cream.”
