There is no substitute for a culture of integrity in organizations. Compliance alone with the law is not enough. History shows that those who make a practice of skating close to the edge always wind up going over the line. A higher bar of ethics performance is necessary. That bar needs to be set and monitored in the boardroom.  ~J. Richard Finlay writing in The Globe and Mail.

Sound governance is not some abstract ideal or utopian pipe dream. Nor does it occur by accident or through sudden outbreaks of altruism. It happens when leaders lead with integrity, when directors actually direct and when stakeholders demand the highest level of ethics and accountability.  ~ J. Richard Finlay in testimony before the Standing Committee on Banking, Commerce and the Economy, Senate of Canada.

The Finlay Centre for Corporate & Public Governance is the longest continuously cited voice on modern governance standards. Our work over the course of four decades helped to build the new paradigm of ethics and accountability by which many corporations and public institutions are judged today.

The Finlay Centre was founded by J. Richard Finlay, one of the world’s most prescient voices for sound boardroom practices, sanity in CEO pay and the ethical responsibilities of trusted leaders. He coined the term stakeholder capitalism in the 1980s.

We pioneered the attributes of environmental responsibility, social purposefulness and successful governance decades before the arrival of ESG. Today we are trying to rebuild the trust that many dubious ESG practices have shattered. 


We were the first to predict seismic boardroom flashpoints and downfalls and played key roles in regulatory milestones and reforms.

We’re working to advance the agenda of the new boardroom and public institution of today: diversity at the table; ethics that shine through a culture of integrity; the next chapter in stakeholder capitalism; and leadership that stands as an unrelenting champion for all stakeholders.

Our landmark work in creating what we called a culture of integrity and the ethical practices of trusted organizations has been praised, recognized and replicated around the world.


Our rich institutional memory, combined with a record of innovative thinking for tomorrow’s challenges, provide umatached resources to corporate and public sector players.

Trust is the asset that is unseen until it is shattered.  When crisis hits, we know a thing or two about how to rebuild trust— especially in turbulent times.

We’re still one of the world’s most recognized voices on CEO pay and the role of boards as compensation credibility gatekeepers. Somebody has to be.

The Cerberus-Chrysler Bailout: Time to Open the Mouth of the Whale

The myth that removing the company from what some now regard as the shackles of quarterly statements will make all the difference is just one of the ironies in this deal. Cerberus, like the other members of this secretive club of private funds, is known neither for its patience nor its altruism. When you move from the cold of the storm into the mouth of the whale it may seem warm and quiet.  But it’s only a short-term feeling.

You’re still in the mouth of the whale.

Finlay ON Governance, May 16, 2007 (more…)

Outrage of the Week: Leadership Abdicated

It was a week that illustrated how not to be a leader.

The CEOs of the big three auto makers appeared before the United States Congress, and showed a level of ill preparedness on even rudimentary questions about their bailout pleas that would have incurred the ire of a fifth grade teacher.  Their separate arrivals in three luxury private jets reminded us of when Robert Nardelli, then head of Home Depot, cut off shareholder questions at the company’s annual meeting after 60 seconds. (more…)

Nardelli, Not Marconi

Robert Nardelli, who managed to shrink the value of Home Depot shares when he headed that company (while managing a masterfully opposite result when it came to his own compensation of two hundred-plus million) is embarking on a somewhat similar mission at Chrysler. The Wall Street Journal reports:

“Chrysler LLC is laying out plans to nearly halve the number of models in its product line and significantly reduce the number of dealers selling its cars, company officials told dealers in meetings recently”.

Guglielmo Marconi, on the other hand, widely regarded as the developer of the radiotelegraph, was the creator of dozens of inventions, the holder of countless patents and a (co)winner of the Nobel Prize. In December 1902, he oversaw the first reported transatlantic transmission from Glace Bay, Nova Scotia to Cornwall, England. The story only gets bigger from there.

But if Marconi had been a follower of the Nardelli school of shrinking assets, what started out spanning  the Atlantic would probably have ended with a wireless invention whose signals traveled no further than a driveway.

The Cerberus Deal: Chrysler in the Mouth of the Whale

Every few years, business needs to come up with a new savior. If only we had zero-based budgeting; if only we were driven by the search for excellence; if only we could stick to our knitting or follow the seven habits of seven successful people. If only… The newest addition to this grand litany of salvation seems to be the arrival on the scene of huge private equity funds and their ability to rescue publicly traded corporations from the curse of public shareholders. We have discussed this subject, and our reservations about the trend, on a few occasions previously.

So often it seems there has to be a crutch to explain away failure or a magic elixir that will solve all the problems. Rarely will management admit that it dropped the ball or that a company’s difficulties were the result of limited vision or poor judgment. You never see complacency, which is often the real culprit in boardroom misadventure, booked and fingerprinted as an accomplice to underperformance. Spend a few hours with senior managers, as I have done on thousands of occasions over some 30 years, and you will quickly see that arrogance, denial and a stunning disconnection from the real world of customers and markets are too often the overriding characteristics of their style and the seeds of their folly. As I have long contended to rather stunned audiences of business students and corporate executives alike, if businesses were actually run by well-grounded managers with a true sense of vision, a genuine appreciation of the people and stakeholders who shape corporate success and an ability to be governed by sound judgment, many companies could improve their performance by between 20 and 33 percent. Too often, it is the over-paid, game-playing manager with the Napoleonic power complex, the one who will cut corners to look good in the short run, who places himself ahead of all others and lacks an understanding of the contribution of employees and other stakeholders —and then looks for scapegoats when his plan fails— who is at the helm today.

Which brings us to the Chrysler-Cerberus deal. Look at these words carefully:

We’ll be able to run it the way we want to run it and not worry about quarterly numbers or what somebody might think on the outside. We’ll do what’s best.

Chrysler CEO Tom LaSorda, May 15, 2007

To suggest, as Mr. LaSorda has, that Chrysler’s investors, or the fact that its stock was traded on the New York Exchange for the better part of the past century, prevented the company from being run the way they “want to run it,” or that they were hampered from doing “what’s best” during this period, shouts of a disingenuousness that will not serve the company well. Why not blame the full moon? At least it has some effect upon the Earth’s reality.

Chrysler performed unsuccessfully because of a number of factors —high production costs, poor image, quality problems and the fact that Japanese makers seem to get so much more right. The company was looking for a crutch when it merged with Daimler nine years ago in another deal that many, myself included, thought ill-advised. (Is it not curious that, during this time, the Mercedes-Benz division also experienced a marked deterioration in the quality and reputation of its cars, along with a significant slump in sales? As a three time Benz owner, I can attest to the fact that cars being built during much of this period were nothing like the ones built in the pre-merger days, which is why I have a new Japanese-brand car today.)

Chrysler is looking for another crutch with Cerberus. Many depend upon Chrysler, especially its 88,000 employees and 111,000 retirees and their families, so it is natural to hope for the company’s success —if one views success as restoring Chrysler to a point where it is optimizing its assets and its capacity for innovation and advancing the well-being of customers and stakeholders.

I am skeptical that the Cerberus deal will do that, however. Chrysler was a great American icon — a business institution that had a distinct culture and history. It was the master of its own destiny for generations. That will change with its new owners. Cerberus makes money, not icons and institutions. It does so secretly and behind closed doors, not as a transparent corporation with pubic investors. There’s no roster of executives or board of directors on its web site. There’s no code of ethics that is held out to the public governing the way they do business. You don’t get to see who is behind the company and from where —and what countries— the investing dollars are coming. If you believe that accountability and transparency are indispensable attributes of success, and that they are necessary characteristics of great power in a complex society, as I do, you might have some misgivings about this deal.

Ultimately, what is likely to happen is that much of the company will be dismantled and the American public will be saddled with a large part of the pension and health care liabilities facing Chrysler. Cerberus can play hardball with unions, governments and others, and not care much about what people think. They can hire—and already have— platoons of lobbyists to advance their case, which will invariably involve whatever enhances their profits —the profits of a select and unknown few. It can become a troubling matter when concentrations of wealth and power become untethered from the discipline of public opinion. Because it is not a publicly traded company, it is said Cerberus doesn’t need to be worried about how it is perceived by the public. J.P. Morgan and his cronies thought the same. Then there were those pesky hearings in the House of Representatives headed by Arsène Pujo in 1912 that changed some of the ground rules under which the likes of Mr. Morgan operated. The power and privilege which today’s cabal of private capital is accumulating, and the troubling issues of responsibility, lack of transparency and social impact it raises, will, I predict, one day see a similar burst of legislative involvement.

The myth that removing the company from what some now regard as the shackles of quarterly statements will make all the difference is just one of the ironies in this deal. Cerberus, like the other members of this secretive club of private funds, is known neither for its patience nor its altruism. When you move from the cold of the storm into the mouth of the whale it may seem warm and quiet. But it’s only a short-term feeling.

You’re still in the mouth of the whale.

Should Frank Stronach Really Run Chrysler?

Now that Magna’s Frank Stronach has made his bid for Chrysler official, the more fundamental question for investors and other stakeholders is whether the assets of this icon of American capitalism will be well-served in the hands of a mercurial figure who claims that money has no heart, “no soul, no conscience, no homeland“, and who has made his disdain for the labor movement no secret. There is a world of difference between operating a profitable but relatively low profile Canadian-headquartered company like Magna and one of America’s corporate giants. It would be unthinkable for a CEO of an historic American company like Chrysler to boast that, with $52 million in compensation, he was underpaid, as Mr. Stronach did a few years back.

Global companies like Chrysler, for all their economic problems, are still complex institutions with enormous power in society. They carry comparable social responsibilities. It is unclear that Mr. Stronach understands that concept to the extent that Chrysler’s leadership would require, or that he would be prepared to adapt to all the constituencies who have a claim on Chrysler’s decisions and, most decidedly, an influence upon its success or lack of it.

One more thing. If you are looking for an example of progressive corporate governance and board structure, you will not find it at Magna. To the contrary, with Magna’s system of dual class shares, its history of related parties and insiders as directors and its all-male board, the Stronach style of governance is not encouraging. He even chairs Magna’s nominating committee, which is a considerable departure from accepted corporate governance standards.

When Frank Stronach is involved, power is concentrated in Frank Stronach. Would his style work at Chrysler? It’s worth thinking about.