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.

In the Press on the Melnyk Mess at Biovail

Biovail, Canada’s largest publicly traded drug manufacturer, has been in the news probably more than it would like lately. It has had problems with its financial performance, with securities regulators and with its former CEO, Eugene Melnyk. When Mr. Melnyk was at the helm of the company, it was not exactly known for its exemplary corporate governance practices. The board culture worked well for Mr. Melynk, however. For 2001 and 2002 alone, he took home more than $188 million.

While the company did clean up its governance act in some ways, Mr. Melnyk still managed to run afoul of securities regulators in Canada and the United States. Last year, he settled with the OSC on charges of failing to file proper insider trading reports. Since then, new enforcement actions have been taken against him (and certain other past and current Biovail employees) by the SEC and the OSC in connection with accounting statements. It will be interesting to watch whether the OSC, not known in recent years for its vigorous prosecution of securities violators, will come down harder on Mr. Melnyk because of his previous encounter with that agency. We’ve posted a few thoughts on this saga over the past year.

The current issue of Canadian Business contains some comments from an interview with me on the Biovail/Melnyk travails.

What Are Your Plans for Biovail Now, Mr. Melnyk?

Last week, we received inquiries from the press asking for a comment on Eugene Melnyk’s plans to change the board of Biovail. The published versions omitted our most important point: the SEC’s probe into Mr. Melnyk and Biovail may be the biggest factor in determining any influence he has in the future of the company. The second shoe in the investigation dropped today with the SEC bringing civil charges of accounting fraud against Mr. Melnyk and several other parties. Similar proceedings were also brought in Toronto by the Ontario Securities Commission.

We expect Mr. Melnyk will be putting his plans for the company he founded on hold for a while. He was at the helm of Biovail when the alleged improprieties occurred and his griping about the state of the company now is a little like Conrad Black lambasting the board and management of Hollinger Inc., and its Sun-Times Media Group subsidiary, from his baronial power base at the Coleman federal prison complex in Florida.

The complaints also included proceedings against Biovail’s most senior financial officials: current Controller John Miszuk and current CFO Kenneth Howling. The company has announced that they have been reassigned to other positions in the organization. Biovail needs to be more specific about how close those roles are to financial functions in the company as the market does not generally respond well when so many past and current officials are the subject of regulatory proceedings, especially those involving fraud.  (See Hollinger).

The company itself paid a $10 million penalty to the SEC for its role in the alleged accounting scheme.

OSC Hits Nortel With a Wet Noodle





Today’s Financial Post has some comments from me on yesterday’s settlement between the Ontario Securities Commission and Nortel Networks. Peter Brieger does a good job setting out the background. Like many things the OSC has done lately, some of which we have commented on before, this one leaves us wondering if anyone is really home at Canada’s so-called premier securities regulator.

Last week, the OSC settled with Biovail founder Eugene Melnyk for $ 1 million —the same amount it is seeking from Nortel. The Melnyk settlement involved an individual. Nortel, on the other hand, is a leading corporate issuer and the offence took place repeatedly over a period of several years. If the settlement with Melnyk was fair and appropriate, it is hard to see the OSC’s deal with Nortel in the same light.

For Nortel only to contribute toward the costs of the investigation opens the door to others seeing it as just a cost of doing business improperly. Unlike the Melnyk situation, where no investors appeared to suffer, Nortel’s actions resulted in investors being systematically deceived and misled over a considerable period.

This decision sends precisely the wrong signal, but it is consistent with the lame image the OSC continues to create in the minds of investors who are looking for more than a cost of investigation outcome. And it raises the question: What exactly is the business of the OSC? It seems to go out of its way to find reasons not to pursue potential wrong doing or to prosecute. Now, the fact that the executives on whose watch this occurred are no longer there seems to be the latest excuse. Nortel is a corporate entity with its own legal rights and obligations. Executives were not acting on their own behalf; they were acting for the company. Shareholders relied upon the company’s actions and statements; they were not relying upon the executives in their personal capacities. But the OSC seems to want to take the easiest route to making it look like it is still on the scene when it is doing little more than an impersonation of a regulator. I predict some investors will be more outraged by the actions of the OSC than by the events that prompted the investigation in the first place, and will again be demanding reform of Canada’s system of securities regulation.

It is hard to regard this outcome as anything but one more indication that the OSC is out of touch with the investors it is supposed to be protecting and lacks the will and the judgment needed to properly regulate an important sector of Canada’s capital markets.


Melnyk’s Resignation from Biovail: When the SEC Comes Knocking at Your Door it Tends to Concentrate the Mind

I had an interview with Peter Brieger yesterday about the sudden resignation of Biovail head Eugene Melnyk. It’s in today’s Financial Post. Mr. Melnyk’s is a familiar story where a dynamic entrepreneur founds a company, does well, tends to dominate its affairs and places less emphasis on the checks and balances of sound corporate governance practices than is advisable. Then problems arise. Right now, the results of a similar scenario are being played out in a Chicago courtroom in the case of the United States vs. Conrad Black. It should be said that Mr. Melnyk had far fewer advantages starting off than did Mr. Black, as we have noted previously. To me, a significant portent of the problems Mr. Melnyk and his company are now facing came when he received an annual compensation package of $122 million in 2001 alone.

The Melnyk/Biovail case is interesting from another perspective. While Mr. Melnyk was being investigated by Canada’s Ontario Securities Commission, he held on to his post. Just days after receiving the “Wells Notice” from the SEC, he threw in the towel. Members of the Hollinger International audit committee have also received Wells Notices, and judging by their recent testimony regarding the nature of their directorial “oversight, ” the SEC’s actions can’t come fast enough in my view.

As I said in the interview, when the SEC comes knocking at your door, it tends to get your attention. It’s another example of how differently the two regulators are viewed even in Canada by Canadian business figures and a further indication that the OSC has a problem being taken seriously and that Canadian investors have a problem being adequately protected by it.