Boards are spending more time than ever on governance, compliance, and risk. Yet despite all this effort, nearly half still provide no dedicated oversight of corporate culture. In fact, according to an article posted by Deloitte, authored by Lori Pressler, Michael Rossen, and Miira Velia on Why ethical leadership is your board of directors’ best defense, it found that 48% of boards do not formally oversee culture at all. That’s a remarkable statistic in 2025 especially when culture failure is almost always at the heart of every reputational or regulatory crisis.
Ethical leadership has become the missing link between risk management and resilience. It’s not a side conversation for HR or compliance anymore, it’s now central to how organizations protect their people, their purpose, and their performance.
When we launched our 2025 Ethics & Compliance Program Effectiveness Report, one pattern was impossible to ignore, and it was that the higher the leadership level, the rosier the view of culture. 79% of executives told us they make difficult decisions aligned with company values, yet only 37% of middle managers agreed. On the front lines, that number dropped even further. In financial services, the divide was even more pronounced, with 91% of senior leaders versus just 28% percent of middle managers.
This leadership disconnect matters because employees take their cultural cues from the managers closest to them, not from the boardroom. When middle management doesn’t model values, ethics becomes theoretical. Trust erodes. And once trust is gone, compliance can easily follow.
Our research also highlights a generational fault line that boards can’t afford to overlook. Gen Z employees are 2.5X more likely than Baby Boomers to believe it’s acceptable to “break the rules if needed to get the job done.” They are also 2X as skeptical about managerial fairness. This isn’t just cynicism; it’s a call for authenticity. Younger employees want leaders who explain why a decision is ethical, not just what the policy says. They expect visible integrity, not performative messaging.
Strong ethical cultures do more than reduce risk, they outperform. In LRN’s Benchmark of Ethical Culture last year, we reported that companies with strong ethical cultures outperformed their peers by 50% across innovation, adaptability, and customer satisfaction. They observed less misconduct and reported it 1.5X more often. Culture, it turns out, isn’t a “soft” metric; it explains nearly 70% of the variance in business performance.
Deloitte’s research into board oversight of ethical leadership reinforces this point well. It frames the path forward through four imperatives: expression, empowerment, engagement, and evaluation. Expression means setting the tone from the top, not just through words, but through how strategic decisions are made, whether in M&A or AI adoption. Empowerment means ensuring employees feel safe to speak up, and that boards hold management accountable for fostering that environment. Engagement means investing in ongoing, scenario-based ethics training that keeps pace with emerging risks. And evaluation means treating ethics like any other performance metric, measured, benchmarked, and tied to accountability at every level.
Yet measurement remains one of the weakest links. Only 40% of financial services firms measure their ethical culture regularly according to our research, and just a 33% assess their program’s effectiveness. High-impact programs, by contrast, are nearly 2X as likely to use benchmarking and data analytics to manage compliance, and more than 2X as likely to prioritize third-party due diligence. The difference between high- and medium-impact programs isn’t moral intent, it’s data literacy and discipline.
Boards that truly want to safeguard reputation and resilience must treat ethical leadership as a living system, not a compliance checklist. They need to know what culture feels like beyond the board pack and the CEO’s narrative. They should see data that shows whether people believe the rules apply equally to everyone, whether managers are trusted, and whether employees feel safe challenging decisions that don’t align with values.
Ethics is never about perfection, it’s about consistency. When boards express, empower, engage, and evaluate through an ethical lens, they move from being passive overseers to active stewards of trust.
