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.

Drabinsky Gets 7 Years, and Canada Finally Gets Some Respect For its White Collar Criminal Justice System

Seven years for a high profile corporate fraud may not seem like much compared with the sentences handed out in the United States (see Jeffrey Skilling, Bernie Madoff et al.), but it is an eternity for Canada.  The country that produced Conrad Black and Garth Drabinsky has become notorious for its light touch when it comes to dealing with boardroom felons.  But something, perhaps that very fact, appeared to prompt Judge Mary Lou Benotto to take a different approach and hand out a sentence today that was toward the higher end of what was expected – including on these pages.   It is even more than the 76 months Conrad Black, Mr. Drabinsky’s good friend and former Livent board member, got for his corporate fraud adventure.

The seven years that elapsed between charges being laid against Mr. Drabinsky (2002) and his sentencing (2009) shows that Canadian justice can move painfully slowly.  But today also demonstrates that, in the end, reasonable justice – not the Bernie Madoff-type American overkill or the wet noodle approach so often handed out by Canada’s top securities regulator – can prevail and the time can be set to fit the crime.  Even for the rich and famous.

We had some harsh things to say about some of the wording in the judge’s verdict and the slow approach taken in the sentencing process.  But now it appears that Madame Justice Benotto has discharged her duties with fairness and with firmness.  The security of Canada’s capital markets at home and their reputation abroad are better for her efforts.

Drabinsky’s Slow Motion Justice, Canadian Style

The long-running Livent legal drama shows that what passes for Canadian justice among white-collar offenders remains something of a mystery, like a glacier that moves imperceptibly.

You have to wonder what Livent’s former investors are thinking, or what others might be learning, about Canadian justice.  First of all, there were four convicted criminals on Livent’s board, which we were the first to note here.  That would be a record if it were not for Hollinger’s boardroom, which boasted a grand total of six felons.

Next, they have had to contend with the iceberg that is Canadian justice.  Garth Drabinksy and Myron Gottlieb were both charged with fraud in U.S. federal court in 1999.  It wasn’t until 2002 that they were charged in Canada.  Six years later the trial began, and last March a conviction was handed down.  In a much shorter span of time, Martha Stewart, Jeffrey Skilling, Sanjay Kumar, Dennis Kozlowski and Conrad Black, to name a few, were all charged, convicted and put behind bars.  Some are still there.  Livent’s duo were convicted in March of this year.  They will not be sentenced until mid-August, seven years after the Canadian charges were filed.  There will be appeals that will keep the crafty pair out of jail for many years.  Along with an appointed senate and a system where the prime minister selects judges for the supreme court and all other top courts without any constitutional checks or balances whatever, what passes for Canadian justice as it pertains to the errant white- collar community remains something of a mystery.  Nortel’s former CEO has yet to see the inside of a courtroom.   The Ontario Securities Commission seems to have forgotten about Hollinger and dropped an appeal in a high profile case it lost.  No one was ever convicted in the Bre-X fraud, the largest crime of its kind in mining history. None of this, including the lethargic handling of the current Livent case, is likely to change the image that Canada is soft on white-collar crime.

If that playbook is followed, Livent’s founders will spend a relatively short time in prison.  A sentence of between two-and-a-half and three-and-a-half years would not be surprising given the leniency Canadian judges have shown toward miscreants in the boardroom.  These courts have little trouble expressing outrage over a single mother who passes bad cheques.  When it comes to rich tycoons or theater impresarios, their disdain appears more muted, almost apologetic, for having to find someone guilty.  Livent’s founders will regain some measure of freedom within months of beginning their sentences.  Some of Judge Mary Lou Benotto’s decision reads in places like a publicity brochure for one of Livent’s productions and in others could pass for the citation during the awarding of an Order of Canada medal (which Mr. Drabinsky holds).

As to the proposal put forward by Mr. Drabinsky’s lawyer that his sentence include no prison time but rather a speaking tour on the topic of ethics in business:  In this fictional portrayal worthy of the stage, Mr. Drabinsky would find himself in the company of an interesting cast.  Ken Lay used to give such speeches before his conviction in the Enron case.  Bernard Madoff, when he chaired NASDAQ’s board, was seen as a strong advocate of robust industry regulation on Wall Street.  Michael Edwards, a former chairman of the Toronto Stock Exchange, was also considered a proponent of ethical and governance reforms, until he was penalized by the Ontario Securities Commission for his failures in the RT Capital (then a division of the Royal Bank of Canada) scandal some years ago.  He was also a member of the committee that brought forward the Exchange’s 1994 landmark corporate governance guidelines.  It was later discovered that he chaired a board at RT Capital that never actually met.  Ethics, it seems, is the last available refuge for the corporate scoundrel.

Having looked at the subject over several decades and given more than my share of speeches and media interviews on it, as well as advice to several governments and major corporations, I have found that it is a good idea for one to know something about the subject of ethics before claiming to extol it.  It requires a commitment to ethics as a core value, not as a convenient tool to avoid prison or promote good public relations.  Ethics might also entail some knowledge of right and wrong.  As far as Mr. Drabinsky is concerned, there has been no demonstration of remorse or appreciation for the wrong he committed and the injury he caused.

Canadian justice has moved at its customary glacial pace since the fraud at Livent was alleged in the Manhattan Office of the U.S. Attorney.  Perhaps all investors and advocates of a higher standard of justice in the boardroom and enforcement by Canadian regulators and the courts have left is the hope that by the time the sentence is handed down next month, it will not have melted into a puddle of meaningless platitudes where the offenders pay with empty words instead of a significant measure of their freedom.

Boardroom of Felons

We have received a number of emails from readers who were shocked at the revelation, first brought to light on these pages, that, between them, the boards of Livent and Hollinger had seven directors who became convicted felons.  Here’s another gem:  three of them were trained as lawyers.  The number of felon directors on these boards sets a record for modern publicly traded corporations.  For those interested, here’s how the total was calculated:


A. Alfred Taubman, Director (convicted of price fixing, 2001)

Conrad M. Black, Director (convicted of mail fraud, etc., 2007)

Garth H. Drabinsky, Director (convicted of fraud, etc., 2009)

Myron I. Gottlieb, Director (convicted of fraud, etc., 2009)


A. Alfred Taubman, Director (convicted of price fixing, 2001)

Conrad M. Black, Director (convicted of mail fraud, etc., 2007)

F. David Radler, Director (convicted of mail fraud, 2007)

Peter Y. Atkinson, Director (convicted of mail fraud, 2007)

John A. Boultbee, Director (convicted of mail fraud, 2007)


Black, Drabinsky and Atkinson were trained as lawyers.

Gottlieb and Boultbee were trained as professional accountants.

Both Black and Drabinsky, during the time of the crimes for which they have been convicted, were members in good standing of the Order of Canada, the country’s highest civilian honor.  They remain so today. There is no indication if or when they will be stripped of that prized decoration, which, as we have long maintained, is a sad commentary on the distinction, on the men and women or who hold it and, especially, on those who are entrusted with maintaining the integrity of the award.

Drabinsky Lays an Egg

liventThe descent to criminal status of Livent’s founder, like that of his friend and former board member Conrad Black, was stunning but not entirely surprising, given the contempt both men showed for modern corporate governance practices.  Between the boards of these now defunct stock market icons, Livent and Hollinger, there stands a roster of seven directors who became convicted felons.

They shared a taste for the finer things and reveled in the image of being larger-than-life figures.  They were also good friends.  One served on the other’s board.  Both were members of the esteemed Order of Canada and held numerous honorary degrees and other accolades.  And when they fell into legal difficulties, they were represented by one of Canada’s most respected criminal lawyers, Edward Greenspan.  Now they share another label:  convicted felon.  Soon Garth Drabinsky will follow his friend Conrad Black, now serving a 78-month sentence in a Florida federal prison, to a new address with a very tall fence and rather drab clothing.  Earlier this week, Mr. Drabinsky and his long- time colleague, Myron Gottlieb, were convicted in a Toronto court on all charges of fraud and forgery in connection with their management of Livent, a once- thriving theatrical production company.

Like Mr. Black, Mr. Drabinsky travelled in a rarified circle of the rich and famous, occasionally bumping into more common mortals.  There was a rather eerie period a few years ago when Mr. Drabinksy and I frequently found ourselves standing just behind or in front of each other at some pleasant dining establishments in New York and Toronto.   At one point, a maître d’ at the Four Seasons asked if we were together.  The New York coincidences ended when Mr. Drabinsky was charged with securities fraud by the Manhattan U.S. Attorney and became a fugitive from justice when he failed to surrender himself.  For a while, we shared the same tailor.  Mr. Drabinksy had an understandable preference for Italian Brioni custom-made suits.  His appearances were always considered something of a theatrical production themselves by my tailor, who would boast frequently that the impresario had just picked up four or five new suits.  Helping me pick out an on-sale, off-the-rack Brioni must have seemed like a real off-Broadway production to this impressionable fellow.

More than once I have found myself standing in front of the pastry counter at what some think to be a chichi grocery store when Mr. Drabinsky has popped up to inquire about the freshness of a chocolate layer cake.

A couple of summers ago, we wound up on the same road in the middle of nowhere in Ontario’s cottage country.   But there was Garth, in his black Porsche Cayenne Turbo, dawdling and weaving on the road in front of me, looking like something of the Phantom of the Highway.  I think he may have been looking for property on which to build his new $5 million cottage, which I thought at the time was quite a display of chutzpah, given that a number of friends had just put together a legal defense fund for him after Canadian authorities charged with fraud and forgery.

I gave a short blast of my horn as I moved around him, fearing that he might wander into the passing lane.  He managed a pleasant smile and a wave, not realizing once again that it was the fellow who was the first to raise red flags in a major publication about Livent’s corporate governance.  

Therein lies another interesting trait Mr. Drabinksy and his corporate empire shared with Conrad Black and Hollinger:  a board of directors where management dominates and controls.  Mr. Black was CEO, chairman and president, as well as chairman of the executive committee, of Hollinger.  Mr. Drabinsky held the same posts at Livent.  Perhaps he took his cue from Hollinger’s structure and confirmed it by placing Conrad Black on his board. When Mr. Drabinksy fell into legal difficulty, Mr. Black was part of a group who came to his rescue.  Order of Canada members stick together, it seems, inside and outside the law. (There is still no indication that Canadian officials seek to strip Mr. Black of that country’s highest honors or of the membership he holds in Canada’s Queen’s Privy Council). 

What boggles the mind is the stellar board of directors that Livent boasted.  The names follow below in my original op-ed piece published in the Financial Post in 1998.  One name, in addition to Mr. Black’s, stands out in Technicolor:  A. Alfred Taubman.  Mr. Taubman, who was also a director of Hollinger, served on Livent’s audit committee.  In 2002, he served one year in federal prison for criminal violation of antitrust laws. 

Thus the following fact is now revealed for the first time in the context of the criminal convictions this week in Toronto.  At Livent, five individuals who held the post of director have at one point or other been convicted of criminal conduct.  At Hollinger, five directors in the company were also found guilty of white-collar crimes.  Two -Black and Taubman- sat on the boards of both Hollinger and Livent.  Between the boards of these now defunct stock market icons, Livent and Hollinger, there now stands a roster of seven directors who became convicted felons.  Odd, too, is the shared training both Mr. Drabinsky and Mr. Black had as lawyers.  Both earned a well-established reputation for their inclination toward litigation.  It is in the most serious kind of litigation, the fight for one’s freedom, that both lost their reputations.

When I used to make observations about the risks posed by so many insiders on the boards of Livent and Hollinger, many in the business press and market analysts would often skoff at my concerns and point to the stellar performance of the companies and the trophy names on their boards.   Now it seems that this structure was a convenient cover for the perpetration of accounting frauds in two orgnizations where the CEO had little trouble mesmerizing even big name directors, who ultimately showed little knowledge of, or sympathy for, modern corporate governance practices.  One wonders if the board thought it was viewing a theatrical event rather than governing a publicly-traded corporation. At Livent, directors gave Mr. Drabinsky and Mr. Gottlieb bonuses even when the company was losing money, and allowed Mr. Gottlieb to sit on the board’s audit committee.   Even the recurring statement in Livent’s proxy circular that the board was viewed by management as something of an advisory group did not seem to bother these directors.  One phrase especially caught my attention a decade ago when the company claimed that the board preferred to rely on the “specialized expertise” of Drabinsky and Gottlieb.  We learned the meaning of  “specialized expertise” this week.

How loud the thud when oversized egos come crashing to the earth, which they otherwise rarely touched before.   No matter how often the sound is heard -Conrad Black, Bernard Madoff, R. Allen Stanford and, recently, Peter Pocklington, one-time owner of the Edmonton Oilers who gave Wayne Gretzky his first NHL season, come to mind- it is impossible not to wonder what might have been if they had been imbued with a lesser ego and a larger sense of integrity and perspective that might have kept their feet more firmly planted on the ground.   

One of my articles on Livent did manage to make its way into the Financial Post some years ago.  I have reprised it below.  Incidentally, this was my final contribution to the Post, which had been running my Op-Eds since the 1970s and on a number of occasions called on me to help write editorials in the newspaper.   Shortly after the article was published, Mr. Black bought the paper.  I was told later by editors that he did not appreciate the article about Livent.  My by-line did not appear in the Post again.  Mr. Black’s successors -who continue to cheerlead for him and run the occasional columns produced from his prison cell, and have expressed the view that his crime was of a minor nature- prefer to keep it that way.  The Financial Post ran a retrospective of the key articles it had published about the Livent saga going back to 1998.   It did not  include the article below, which ran in August of 1998.

Saturday, August 15, 1998

Guest Column

Livent shakeout raises issues about how boards work


The Financial Post

The guns of August are booming again. Four summers ago, the blue-chip board of Confederation Life Insurance Co. came under fire for its failure to prevent that company’s collapse. This time, the target is Livent Inc., where assertions of financial irregularities have led to the suspension of company founders Garth Drabinsky and Myron Gottlieb. On their face, the accusations seem implausible. If true, they would mean there had been a systematic juggling of the books under the noses of some of the most prominent figures in Canadian business. Once again, troubling questions would be raised about whether boards really work, or whether they are just relics of the past.

It will likely be some time before all the facts come to light, but the recorded corporate governance practices of Livent give important insights into the nature of board supervision in the company.

For the period in which the irregularities allegedly occurred, Livent had a board that varied between 13 and 14 directors. Toronto Stock Exchange guidelines, as well as best governance practices elsewhere, recognize that there should be no more than two insiders on the board — usually the chief executive and chief operating officer. In Livent’s case, three senior company officers were also directors in addition to Drabinsky and Gottlieb. Five insiders on a board of 14 is a rarity in Canadian business these days, and not an admirable one at that.

Interesting, too, is the fact that Drabinsky held the dual positions of chief executive and board chairman up to June.  It is widely believed that having a non-executive director as board chairman provides for better accountability and board oversight of management.

The most notable feature of Livent’s board, however, is the fact that it is composed of such high-profile names. Conrad Black has been a director since 1993. Joseph Rotman has been on the board since 1995. Jim Pattison joined the board in 1997. Indeed, in some ways it would be difficult to find a more distinguished board. Black, Rotman, Pattison and Drabinsky are all members of the Order of Canada.

Could such respected and experienced business leaders have been duped? Did the audit committee of the board, which included Rothschild Canada chief executive Garfield Emerson, Sotheby’s chairman and shopping centre king Alfred Taubman and polling guru Martin Goldfarb, fail in one of the director’s most solemn duties: to, as Harvard board scholar Myles L. Mace observed, “ask the right questions”? Or were they given the wrong answers? Livent also claims outside directors on the board’s audit committee have a procedure for meeting independently with the auditors, if they so choose. It will be interesting to learn in the weeks and months ahead if they ever did.

The company has declined to follow TSE recommendations and form a nominating committee composed of outside directors for the selection of new board members. Instead, company documents as recent as May state it prefers to rely upon the “specialized expertise” of Drabinsky and Gottlieb, who, along with unnamed outside directors, look for board members who will “supplement” management. That concept alone, where directors are viewed as some kind of appendage of management, ought to have set off alarm bells among professional investors.

The same philosophy might explain why the board felt no need to follow TSE guidelines in forming a corporate governance committee to examine ways of ensuring board effectiveness. Perhaps now they might wish they had.

Much is resting on the outcome of what happened here, not the least of which is Canada’s already tarnished reputation in global investment circles over the Bre-X Minerals Ltd. and YBM Magnex International Inc. scandals.

If financial irregularities did occur, it may be hard for the investing public and policy makers to resist concluding high-profile boards are little more than ornaments on management’s Christmas tree, and sweeping change is needed.