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.

Outrage of the Week: Retreat Behind the Curtains

outrage 12.jpgDoes FASB’s change in accounting standards improve investor confidence or detract from it?  Is it a move consistent with a renewed commitment to transparency, or is it that famous political game of dressing up disaster like putting lipstick on a pig?

If you looked at all the causes of the great recession of 2008-2009 -which would doubtless include unbridled greed, an unconscionable obliviousness to risk, complacent regulators and sleeping boards- lack of transparency would figure high on the list.  The extent of credit default swaps, for instance, which, in the case of Bear Stearns, Citigroup and AIG, appears to soar into the trillions, was a ticking toxic time bomb hidden from investors.  They were nowhere on the radar of regulators, either.  At some point, the silent ticking stopped and the world was abruptly awakened to the costs when risk and reality are allowed to be covered by a convenient curtain of concealment, if not outright deception.

It is, therefore, with some dismay that we greet the recent announcement by the Financial Accounting Standards Board (known as FASB, and another institution that does not exactly go to Herculean lengths to make itself clear and understandable to the average person affected by its decisions) to permit a retreat from current mark-to-market rules.    These are the accounting principles that have required banks to place a current market value on their assets.   Many of these assets have been categorized as “toxic” because they are based largely on mortgages that have plunged in value with the residential real estate market.  Beginning with the collapse of Bear Stearns a year ago and all through the turmoil that has shaken the credit and capital markets, toxic assets have prompted trillions of dollars in bank losses, write-downs and interventions from the Fed and U.S. Treasury.

The accounting changes announced this week will allow banks to take a variety of approaches to valuing the assets under stress, and many will no doubt go into an impressive series of contortions to convince investors that they know better than the market their real value. If only somebody would pay that price, they could get back to the days when Ken Lewis of Bank of America was making $100 million, as he was in 2007, and bankers would be heroes again.  But markets don’t always co-operate in the self-idolization aims of men, and it is not entirely clear that some banker’s valuation that supposedly trumps the market’s view is going to have any credibility at all.  FASB’s move may be favorable for some banks in the short run.  But will it accurately portray their state of affairs in a way that investors will trust when uncertainty has on more than one occasion given confidence quite a beating and knocked it down for the count?  The New York Times’s Floyd Norris, long a follower of accounting standards and practices, has a number of insights on his blog into how this change came about.

What is most feared is that the gatekeepers are allowing another dimension of uncertainty to be introduced into the economy’s precarious equation just when it is widely agreed that what is needed is transparency with all the klieg lights it can marshal.

This is part of a disturbing trend that seems to favor the opaque over the undisguised.  It is still unclear how all the original TARP funds (the program which, even before it was finally enacted, we dubbed the biggest boondoggle in the history of government) have been spent.  The Congressional Oversight Panel, the body charged with monitoring the TARP, has been troubled by its lack of adequate controls and transparency. The watchdog’s head, Elizabeth Warren, has described the bailout as “an opaque process at best.”  The TARP’s special inspector general, Neil Barofsky, recently reported that not all recipients of the government’s funds are willing or able to account for how the money was spent.  “The most significant failing from a transparency standpoint: understanding the process and criteria Treasury used to decide who would receive TARP funds and what the recipients have done with the hundreds of billions of dollars that have been invested,” Mr. Barofsky told the Senate Banking Committee.  The $175 billion funneled into AIG has not been fully documented, and only recently has it come to light that a large portion of it went to U.S. banks and financial institutions, like Goldman Sachs, which have already received TARP funds, as well as to foreign banks.  Then there is the issue of compensation and bonuses, where awards have been made behind closed doors only to prompt public disbelief when they are finally brought to light.  Trillions of dollars in Fed commitments and loans remain clouded by a veil of secrecy.  The struggle to achieve transparency appears to be as challenging and arduous as the battle to restart the economy.  It is not coincidental that the two are linked. 

The lessons of the financial abuses and failures that came to light in the 1930s, like the excesses and deceptions of Enron and WorldCom some decades later, all point to the imperative of doing business in an open and accountable fashion.  That applies especially to honest and accurate financial statements that reflect reality, not the pipe dream of a CEO who wants to put a happier face on the company’s situation -at least until he can cash in his stock options and retire in regal style.  We have already seen too many companies shock their investors and the world by having carried on with a degree of leverage and risk that no sane person would have condoned.   The solution, or at least a significant part of it, is to move accounting practices and everything else that determines the worth of a company out from behind the heavy curtains that for too long permitted bankers and other players to pull the strings for their own aggrandizement and into the sunlight of greater transparency that is essential to truth and confidence.

Does the recent change in accounting standards, during a time of the most profound unease in the economy and among investors since the Great Depression, improve investor confidence or detract from it?  Is it a move consistent with a renewed commitment to transparency, or is it that famous political game of dressing up disaster like putting lipstick on a pig? 

We see FASB’s decision as a regressive and very large step in precisely the wrong direction, which is why we chose it as our Outrage of the Week.