I believe my department is failing to enforce standards in doctoral examinations. How to proceed?
Yes, I have seen some similar things in my life and this is indeed a very tricky question. There is a strong tension between our ideals regarding the quality of PhD's (and other degrees) we feel our institutions should be awarding and the practical realities on the ground, which involve messy and awkward decisions that have a direct influence on people's lives. This reality is such that sometimes we feel we have no choice but to compromise our lofty ideals to some extent. As long as the compromises are small, this is probably as it should be, but when the compromising reaches alarming levels, it is reasonable to start becoming seriously concerned.

What I would suggest is this. First of all, it may be worth remembering that the behavior you are describing is not your doing nor your responsibility. The chair and the members of the doctoral examination committee are the ones who are making those decisions and putting their own reputation and credibility behind them. So, although you find the behavior concerning and perhaps for a good reason, you cannot reasonably be expected to fight all instances of poor decision-making at your university. Thus, one option is to simply do nothing except to resolve privately that if you ever preside over a doctoral examination yourself, you will follow your conscience and let the chips fall where they may, and thus play at least a small role in making your department and university better.

If you want to be more proactive, an honorable course of action would be to actively pursue the role of chair or member of the doctoral examination committee so you can put the goal of raising standards directly on the agenda. Or you could strive to be appointed to the departmental committee that decides the makeup of the doctoral examination committee, and thereby help get people with high standards be placed on that committee and help prevent the kind of conflicts of interest you are describing. Through such behavior you will be setting a personal example and showing that you are not just criticizing others but willing to take action yourself for the goal you believe in. Since you mention that you believe others in your department feel the same as you, you may find that you have a good number of allies who will support you in your mission, and even your opponents will respect that you are acting on your convictions. Of course, it will take time and effort to bring about change, so be prepared for a long struggle ahead.

Finally, if your position within the department does not make it realistic for you to seek the kind of active, visible role I suggested above, or you are unwilling to make such a large effort to see change happening, I don't have much to suggest. I don't think there are easy fixes; someone will have to do the work to change the culture of your department. If it's not you, maybe you can work behind the scenes to identify more senior allies willing to take on that role. You might get lucky and find someone passionate enough about the subject, but probably you won't.