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.

Excessive CEO Pay Shows Bankruptcy in Ford Boardroom

Few examples stand as living testimony to the bankruptcy of the current model of CEO and top management compensation more than what was announced by Ford Motor Company today. For the privilege of presiding over a record $12 billion loss in 2006, the top seven in Ford’s executive suite received a whopping $62 million. Bill Ford, under whose CEO tenure the huge loss was posted, was paid more than $10 million. Ford’s boardroom party comes after the company announced plans earlier this year to close 14 North American plants and lay off thousands of workers. If this was the cost of failure, you really have to wonder what the price of success would have been.  Somebody needs to reconnect Ford’s board to planet Earth.

I am aware that Mr. Ford received no salary or bonus in 2006. The $10 million figure was mainly in the form of stock options. Are stock options a form of compensation? Yes. Are they an expense to the company? Yes. Did the company suffer record losses mostly under Mr. Ford? Yes. So let’s not dwell too long on Mr. Ford’s spirit of altruism.

But the madness doesn’t end there. CEO Alan Mulally, who joined Ford last October received $28 million —and that’s for just four months on the job. How does a company pay a CEO that much for four months when it has posted a record $12 billion loss? I guess you start with a bunch of pampered directors who are so out of touch that they think such figures will go undetected by the unions from whom it is said Ford must negotiate concessions if it is to survive. It needs something else. It needs a CEO and executives who are prepared to share the sacrifice investors and employees are making —not be the first into the golden lifeboat. And it needs directors who can stay awake long enough to apply good judgment and common sense to the compensation decisions they are making. At least the Titanic changed direction when the icebergs were spotted. At Ford, they still seem to be steering headlong into catastrophe.

Ford has consistently misread the consuming market’s signals. One can hope that this iconic American business institution will prevail. But the pay it doled out to its top brass is an another indication that the disconnected and bankrupt thinking that brought the company to its current state of woe is still at work in Ford’s boardroom.

Barry Diller’s Crime Stories

He’s back at it again. After calling corporate governance advocates “birdbrains” a few months ago, as we noted at the time here, billionaire television and internet mogul Barry Diller is accusing the press of conduct that is almost illicit in its reporting on CEO pay. “I think it’s close to criminal,” he said of recent media coverage regarding executive compensation. Mr. Diller, one of the highest paid executives in the United States, also fears for the health of directors, whom he portrays as being nervous old aunts in light of the push to make companies more transparent and accountable. “You have boards now that are skittish in every area. They’ve made chief executives very skittish,” he is reported as saying to the Financial Times.

Apparently, it’s just not as easy as it used to be for a CEO to roll over boards and shareholders and grab as much as he can. (more…)

Goldman Sachs’s Big Payday: Cartoon Characters and Executive Compensation

Thank goodness Goldman Sachs paid its co-presidents $106 million between them for their first year on the job. It works out to $53 million each. If only everything in life could be as fair as the directors who made this even-handed award.

I say thank goodness because it is close to a sub-atomic physical certainty that if they had paid these fellows, say, $43 million each, they would have made a sad clown face. At $33 million, they would have thrown a hissy fit. And at a mere $22 million, they both would have sunk into a deep depression and probably spent the next several months in their pajamas all day long.

The sums being awarded on Wall Street are like candy being handed out by children in a candy store. They have no connection to reality and do not know when to stop. You can see the same culture at work in the huge amounts (and fees) going into private equity deals where there seems to be no restraint either. You can hear it in the constant talk, driven by fund managers and investment bankers, about how the world is awash in money with no limits as to the size or number of deals. Most people have no problem with compensating CEOs and top management well. And Goldman Sachs has performed in a stellar fashion. In a market such as this, it would take some concerted effort to not do extremely well. It is a question of proportion and sound judgment that is at issue.

We have discussed previously Goldman Sachs’s bonuses here.

Some of us have seen this picture before. It is the kind of misguided thinking that leads certain people to believe that the laws of economics and physics have been suspended. It generally occurs just before a major economic downturn and a sudden plunge back into reality. Little children know about it. They understand that when the cartoon character goes off the ledge and seems to be hanging in mid-air, he will surely fall to earth with a thud as soon as he looks down. It’s just one of the immutable laws you learn as you grow up.

If kids and cartoon characters understand about reality, why don’t CEOs and compensation committees?

More on Dr. Diller’s Remarkable Prescription

Barry Diller’s diatribe against corporate governance advocates, whom he claims are “hurting” American business, prompts another observation.

Mr. Diller evidently observed no harm in the abuses typified by the bubble or the excesses in market valuations across the board which ultimately saw seven trillion dollars in shareholder wealth wiped out. He had nothing to say about the jobs and savings lost by Enron employees and offered no ideas about the epidemic of corporate ills that shook confidence in American capitalism more than at any time since the Great Depression. And he’s not offering any ethical prescriptions for the current scandal involving backdating of stock options. But if anyone dares hint that his $295 million in compensation last year might be a tad over the top, the hurt becomes unbearable.

Physicians are supposed to honor the Hippocratic oath. Mr. Diller seems to be practicing something that sounds like it, but has a very different meaning.

Roll Out the Boardroom Ambulance

My problem with governance is that it’s really hurting American business.
–Barry Diller, CEO and chairman, IAC.

Mr. Diller, who calls corporate governance activists “birdbrains” is no doubt feeling the hurt. Why, if it were not for the crazy idea that there should actually be accountability in the boardroom and some sanity connected with CEO pay, Mr. Diller might have been able to make, say, $300 million last year instead of the paltry $295 million he pulled down.

Frankly, I prefer another Barry Diller quote from a few years ago:

This is a world in which reasons are made up because reality is too painful.

We’ve inaugurated a new category to showcase Mr. Diller’s kind of out-of-this-world thinking. It’s called Earth to Board. Call me crazy, but I think it suits Mr. Diller rather well.

Just Say No to Dual-Class Shares

Report will please controlling owner-managers but does it serve the interests of investors who are treated like second-class shareholders?

Not to be confused with The Centre for Corporate & Public Governance, a group called the Institute for the Governance of Private and Public Organizations (interesting choice of names, don’t you think?), created in 2005, has come out with some suggestions on how to make dual-class shares more palatable. The study recommends a number of conditions that might make super voting shares, which give their holders a disproportionate say in the affairs and fortunes of the company, acceptable to even major investment institutions such as pension funds. Now, as an investor, you could get yourself all twisted like a pretzel in trying to accommodate the reluctance of company founders to step up to the reality that when a business goes public you can’t really pretend it is still private. Or you could just say no to such an outmoded, anti-investor scheme. (more…)