Izanami only forces people to acknowledge the bad they've done. In Madara's eyes, he's the good guy. He doesn't do what he does just for the sake of ruining other people's lives, he does it because he doesn't want any more pain or violence. Plus, it also only works on people who are trying to become like someone else; Madara isn't trying to be anybody else, he's being himself, and trying to become the best version of it, at that.
