ICAEW: How to build an ethical, compliance-friendly culture
October 8, 2025
In the modern corporate world, “ethics” appears in mission statements, codes of conduct, and annual reports. But what does that mean in practice, and how can companies go beyond compliance checklists to create cultures of integrity?
There’s building an ethical culture, and then there’s compliance, says Annabel Gillard, a Corporate Governance Consultant who works with various organisations on ethics, culture and technology. “I don’t think the two are the same. Within most businesses, compliance belongs to risk and compliance teams, while culture typically sits within HR.”
The danger arises when organisations conflate ethics and compliance. “In a compliance box, there’s a ‘this is right’ and ‘this is wrong.’ That simplifies and homogenises ethics, which is often contextual, complex, and full of shades of grey,” says Gillard, who is currently investigating the role of ethical culture at Blueprint.
Ethics, she says, is best thought of as a way business is done, rather than a rulebook. “Fraud is definitely unethical. That’s clear. But fairness? That can mean different things to different people. Sometimes principles even conflict. Privacy and fairness, for instance, can clash when you need data to prove whether treatment is fair,” Gillard says.
Experts say the solution is to avoid reducing ethics to endless policy documents. Instead, Gillard stresses that while making people sign a 40-page code of conduct may protect the company legally, it does not change their behaviour. What truly matters, Gillard argues, is how leadership acts compared to what is written – and which behaviours are rewarded versus those that are punished.
Tone from the top
The link between leadership and culture is vital. “When leaders genuinely believe ethics matters, you see it embodied in the culture. I’ve worked for leaders like that and, my goodness, what a joy it is,” she says. “But if leaders don’t set that tone, it doesn’t matter how good your compliance team is. The rules will always be the exception, not the norm.”
Micky Khurana, a corporate governance expert and former governance lead at Meta and Diageo, concurs. “In a small charity I work with, the board chair told our chief executive, after a difficult redundancy process, that the best thing he’d done was remain positive and resilient. Everyone could see it. That kind of modelling matters far more than a written policy.”
Khurana contrasted this with his time at Facebook, where founder Mark Zuckerberg held unscripted Q&As with staff. “When I first saw it, two things struck me. First, he actually listened. He thought about the question and responded. Second, the message was clear: ‘This is your company.’ That sense of curiosity and openness is powerful culture-building.”
Other companies have tried similar gestures. L’Oréal, for example, launched Ethics Day 15 years ago, where the CEO fielded questions from staff for two hours annually. “It’s symbolic, but it shows approachability. Employees need to feel listened to,” he said.
The role of incentives
But listening and tone are only part of the equation. Culture is shaped as much by incentives as by speeches. “Culture is what you reward,” Khurana says. “In big corporates, pay and objectives drive behaviour, but those tools rarely sit in compliance functions. There’s a clear difference between what’s promoted formally and what’s actually valued.”
During his time at Meta, he recalled how growth metrics dominated. “It wasn’t about the bottom line. It was about user numbers and engagement. That’s what you were rewarded for, not ethical behaviour.”
This raises the question of boards’ responsibilities. Peter van Veen, Director of Corporate Governance and Stewardship at ICAEW, stressed that incentives can reinforce or undermine ethical cultures. “Boards must navigate carefully. If they demand rapid returns without considering sustainability, people may take risks or find tricks to inflate numbers. You risk building a house of cards,” van Veen says.
One of the first symptoms of things going wrong is ethical erosion, van Veen explains. “Are people hiding things? Is management adopting a take-no-prisoners style? If so, bullying, fear, and corner-cutting often follow.”
Whistleblowing as a safety valve
For this reason, whistleblowing systems are critical. “Speak-up lines are a safety valve for boards. If there’s a pattern in the complaints, that signals a deeper cultural issue,” according to van Veen.
But again, culture determines effectiveness. “Do staff feel comfortable using those lines? Do they believe they won’t be punished? That’s a litmus test of trust,” he adds.
Trust itself has an economic dimension. Gillard also highlights research showing that, over time, companies perceived as trustworthy outperform their rivals. “Trust is built on competence and integrity; can you do what you say? In a low-trust world of AI and deepfakes, that premium is only going to rise,” she says.
Training that works
So how should organisations train people in ethics? Experts agreed that traditional slide decks and sign-off boxes fall short. “Ethics isn’t a module you grind through on your commute,” Gillard says. “It’s like fitness; it’s a muscle you build.”
The best training involves live problem-solving across diverse groups. “Most ethical failures aren’t villains at work. They’re blind spots or groupthink. When you bring together different perspectives from business, academia and civil society, you realise how complex problems are. And you make better decisions,” she says.
It’s vital for companies to encourage humility and curiosity rather than certainty. “We need a culture shift away from everyone feeling they must have the answer. In fast-changing environments, asking questions and listening matter more than knowledge alone.”
Short-term incentives, whether for leaders or staff, often drive risky behaviour. As companies mature, boards must recalibrate their approach. “Early-stage firms thrive on entrepreneurial risk-taking. But as the game becomes long-term, you need stability, benefits, and structures. Otherwise, you burn people out or create a culture that can’t sustain growth,” Van Veen says.
Ultimately, building an ethical, compliance-friendly culture requires aligning leadership behavior, incentives and structures with the values the organisation claims to hold. Compliance frameworks matter, but they are the skeleton, not the soul.
As Gillard says, “Ethics is not an answer. It’s a question. The companies that thrive will be those that keep asking it and keep listening to the answers.”
“The first signs of material financial issues have an ethical dimension,” van Veen says. “Are people hiding things or afraid to speak up when they see wrongdoing or operational concerns? Is management adopting a take-no-prisoners, aggressive style in driving for results? If so, bullying, fear, and corner-cutting are also likely, often with disastrous results down the line”.
[ICAEW Insights]
