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.

Return of the Pharaohs of Misjudgment

Conrad Black is back at his (temporary) winter home in Palm Beach after being freed on bail pending the outcome of his appeal.  His conservative friends in their College of Cardinals-type media conclaves appear to seek his beatification for what he has gone through. If he is found to have been wrongly convicted, as countless numbers are in Canada and the United States every year without a whisper of concern from Mr. Black’s supporters — or the tens of millions at their disposal to make that case, as Mr. Black has — he is entitled to all the redress available for one of the most terrible wrongs the state can perpetrate on a person.  But, as Stephen Bainbridge points out, there is still much of the dark earth about him that stands between Mr. Black and his final elevation to sainthood.

Richard Fuld was back before another committee attesting to the fundamental strength of Lehman Brothers, which went under for every conceivable reason, except, of course, the failure of its leaders.  Follow-up question: does the Financial Crisis Inquiry Commission realize that Lehman had a board of directors who  might shed some light on the calamity?  Fed chief Ben Bernanke was also back before the Commission, after the Fed admitted, once again, that it misread the depth of the economic downturn in recent months.  A change in lyrics was also detected regarding Mr. Bernanke’s explanation as to why Lehman was not saved.  The self-serving music remains the same, however.  BP’s infamous blow out preventer made its way back to the surface; its corporate image is still submerged somewhere in an ocean of missteps and CEO blunders.  HP’s board is back in the news, and not in a good way.  It showed that you can spend tens of millions on a CEO and, for that lofty sum, still get a chief executive with a missing ethics gene.  The directors’ solution?  Spend tens of millions more to get rid of him in the face of the deception which the board claimed was the reason for his ousting.  Go figure. Canada saw a new Governor General appointed to represent the Queen as head of state.  It came on the sole recommendation of a prime minister whose Conservative Party holds a minority position in parliament.  It is a throwback to a time when most Canadians could not read or write and women did not have the vote.  Still, few Canadians seemed bothered by the quaint tradition. On the other hand, few parents teach the idea that any girl or boy can grow up to be GG someday.

President Obama is back to a freshly redecorated Oval Office, where he has hatched yet another stimulus package.  The new soft beige seating areas will provide a calming effect when yet lower approval ratings are published.  As the distancing of the President from the electorate becomes more pronounced, and the loudening canons of Republican victory signal their approach with each day, one can almost hear the mournful reprise of a love no longer to be: “We’ll always have health care.”

However timeless the Pyramids of Giza and the inscrutability of the Great Sphinx remain, they cannot for more than a few weeks distract our attention from the greater monuments of folly and misjudgment that today’s Pharaohs of business and government routinely create.

They will be pleased to know that, along with all of them, we are back, too.

Still Searching for Signs of Life on the Bear Stearns Board

Corporate governance at the failed Wall Street giant had all the hallmarks of a disengaged boardroom stacked with cronies and dominated by insiders. Finally, Congress can shed some light on where the board was at Bear Stearns — or if it existed at all.

Former Bear Stearns CEO James Cayne will be making a rare public appearance this week when he testifies before the Financial Crisis Inquiry Commission.   Other top executives from the once thriving firm that was a fixture on Wall Street for nearly a century will be giving evidence as well. It will be an ideal opportunity for the Commission to explore the role that questionable corporate  governance practices played in Bear Stearns’s failure.  We set out our views on that subject in a two-part posting called “Did Bear Stearns Really Have a Board?” in early 2008.  They can be viewed here and here.  They remain among our most widely-read columns even today.  Our comments were quoted in The New York Times reviewed book “Money for Nothing” by John Gillespie and David Zweig.

Corporate governance at Bear Stearns had all the hallmarks of a disengaged boardroom stacked with cronies and dominated by insiders.  The most strenuous task of the all-male board seemed to be lifting the rubber stamp embossed with “yes” for gigantic bonuses and anything else management wanted. Only at the very end did the directors even faintly awaken to their duties, after the sudden shock of seeing that no one was at the controls of the engine that was speeding toward catastrophe and realizing that it was too late to retreat to the heavily curtained sleeping car where they long resided.

As we said back in March 2008:

Dig deeper though and you will find a dysfunctional board, overstretched independent directors and an executive chairman whose approach to his duties is novel, to say the least. The first thing that hits you about this Wall Street icon is that it is governed by men. Only men. It was like that at its inception in 1923; it remains a men’s club in 2008. Three of its 12-member board are insiders, as is the executive chairman, James Cayne. (There were actually four insiders until Warren J. Spector, the firm’s president and co-chief operating officer, resigned last fall over the collapse of Bear’s hedge funds.) Best corporate governance practices generally prefer management limited to one or two seats at most. The insider problem in Bear’s boardroom is even more pronounced where all the heavy lifting is done: the company’s executive committee. Composed entirely of the top insiders of the investment bank, company filings confirm that in 2006 (the most recent figures available) the executive committee met on 115 occasions. By contrast, the full board met only six times.

We concluded by suggesting exactly the type of inquiry that is occurring under the Congressional appointed commission headed by Phil Angelides

When such an important financial institution begins to crumble so quickly, leaving the capital markets in turmoil and requiring the intervention of the highest echelons of the federal government, Congress needs to ask some pointed questions.  It should start with the Bear Stearns board.

Finally, a window of Congress can shed some light on where the board was at Bear Stearns — or if it existed at all.

Outrage of the Week: Super-paid CEOs Who Were Not Supermen After All

Never in the history of modern business leadership have CEOs been paid so much to achieve so little at such cost to so many.

At the opening hearing of the Financial Crisis Inquiry Commission held in Washington this week, key players in the worst financial meltdown since the Great Depression admitted they did not see it coming.  The chairmen and CEOs of JPMorgan Chase and Goldman Sachs, Jamie Dimon and Lloyd Blankfein, and the chairman of Morgan Stanley, John Mack (who used to be its CEO as well) all testified that they were surprised at what happened.  They now agree they were overly leveraged and did not handle risk with the respect it deserved.  Mr. Dimon apparently never contemplated the possibility that housing prices would stop rising, much less decline.

It seems that Messrs. Dimon, Blankfein and Mack had as much vision in anticipating the downturn, and the folly of some of their assumptions about growth, as over- extended buyers of subprime mortgages had.  Except that Dimon, Blankfein and Mack were not struggling low-income homebuyers who took on one too many bedrooms.  They were among the highest paid executives on the planet whose word commanded deference and awe among much of the investing public, the media and an ever-admiring circle of policymaker-groupies.

Over the five years leading up to the subprime debacle in 2008, these three men were collectively paid more than $310 million.  For the year 2006 alone, when so many of the seeds of disaster were being sewn on Wall Street and among its top banks, Mr. Dimon was paid $57 million and Mr. Blankfein $38 million.  When Mr. Mack rejoined Morgan Stanley in June 2005, he was awarded stock worth $26 million on day-one, and a further $13 million in compensation and benefits for his first five months of work.  In December of 2006, Mr. Mack was awarded a bonus of $40 million on top of his $1.4 million salary.

As they were being paid these sums, much of the world was increasingly convinced that these were proper incentives to ensure alignment with shareholder interests.  They earned every penny million, it was thought.   The prevailing view, especially among the wishful thinking and the non-thinking alike, was that such men were really superheroes whose ability was so unique and so far beyond those of ordinary mortals, the fact that their feet touched the ground when they walked was seen merely as one of their many generous concessions to convention.

They were not alone, of course.  There have been hundreds of CEOs who have happily participated in the greatest transfer of wealth of its kind –a transfer that, for all the soaring salaries, bonuses and stock options, has ultimately seen the worst economic crisis since the 1930s, the highest job losses in generations and a stock market performance over the past ten years that has produced virtually zero gains, except for the titans and bankers who managed to cash out before the fall.

The 21st century began with a series of corporate scandals involving companies like Enron, WorldCom, Tyco and Hollinger.  It ended its first decade in the throws of the worst financial failure in modern time.  One thing stands out to mark the beginning of this period and its end: the folly of executive compensation.  In 2002, we warned Congressional committees: “The most corrosive force in modern business today is excessive CEO compensation.  Such lofty sums tempt CEOs to take actions that artificially push up the price of the stock in ways that cannot be sustained, and to cash out before the inevitable fall.”  The extent of that corrosion and fall is apparent today.  The consequences in taxpayer dollars soar into the trillions.  The costs in human terms remain beyond calculation, as does the loss of confidence in corporate leadership.

More than just Lehman Brothers, a few banks and a couple of Detroit automakers went bankrupt in this period.  The trust of workers, the middle class and pensioners in corporate management and governance has also collapsed.  There may be a seismic ruin of jobs, dreams and foreclosed homes on Main Street.  But on Wall Street, where people like Mr. Dimon, Mr. Blankfein and Mr. Mack still command adulation for their leadership and vision, the Fed-supported, taxpayer-rescued towers of finance give hope and comfort to those still requiring generous bonuses to get through their Tiffany-challenged day.   The magnitude of their gains this year, less than 18 months from a once- in-a-lifetime experience looking into the abyss, promises also to set new records, which, like housing prices, is something Mr. Dimon thinks should go only one way, too. Recently, he announced that he was sick and tired of the criticism being leveled against Wall Street on the compensation front.

These are forceful accelerants to the rise of Turbo Populism, the term we coined on these pages and will be speaking more about in the future.

Had the world the benefit of a modern Churchill capable of battling the monstrosity of betrayal and failure these titans of excess have wrought, he would surely have given voice to a mood that is thundering across the land from kitchen tables and church pews to swelling unemployment lines and Twitter postings: Never in the history of modern business leadership have CEOs been paid so much to achieve so little at such cost to so many.

This is a reality that escaped the CEOs who appeared before the Congressional committee this week.  They do not escape our sense of outrage.

But Where Was the Board, Mr. Chairman?

[0112wallst]At the opening hearing of the Financial Crisis Inquiry Commission, the bipartisan committee formed by Congress to investigate the causes of the great financial meltdown, there were four chairmen of key Wall Street players in the crisis.  There was much anticipation over the proceedings held today in Washington.  Since its formation last spring, the Committee has had months to prepare for this day.  But there was not a single probing question, as far as we could tell, from chairman Phil Angelides or any other member of the panel, about the role of the board of directors.  This is a glaring omission, if you believe that boards matter and what directors did or did not do to avoid the disaster is an important part of the review.

It is one thing for boards to constantly underperform or  are not taken as seriously by their executive chairmen as they should be, or as an independent, non-management, chairman might want them to be.  It is quite another when an inquiring body appears to forget that, in law and in principles of modern business practice, the buck stops with the board of directors. Where were they?

We will have more on this disappointment soon.