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: When Subprime CEOs Dissemble Before Congress

Never in modern business has so much been given to so few for such colossally failed results.

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In just five years, these three CEOs made more than $460 million while leading their companies into the greatest losses in their history. One of them, Charles O. Prince of Citigroup, even got a bonus of $10 million, despite presiding over more than $20 billion in losses and write-downs. Stanley O’Neal left with $161 million after Merrill Lynch chalked up its largest losses ever. And Countrywide Financial‘s Angelo Mozilo, one of the highest compensated CEOs in America, has pocketed more than $400 million since 1999. The company has lost four times that amount over the past six months. Never in modern business has so much been given to so few for such colossally failed results.

To the average working person, who rarely receives a bonus even for doing an exemplary job, much less a bad one, this performance must have seemed like something of an out-of-body experience. Pay and accomplishment seldom have seemed more disconnected.

But to the past and current CEOs who testified before the House Committee on Oversight and Government Reform this week, there is no disconnect at all. The universe, for them, unfolded exactly as it should. It was about as we expected.

They, and the heads of the board compensation committees which approved these deals, all offered the usual bromides: The amounts were fully approved; the money was earned; the market is king; high pay is needed to attract and keep the best talent. How it is that CEOs who preside over record losses represent the best talent was never quite explained. One claimed only to want to help homeowners live out the American dream. Another cited his grandfather being born a slave. A third trumpeted his company’s ethics and corporate governance reforms.  Mr. Mozilo ventured that the subprime meltdown had a notable culprit:  “There was a lot of fraud there.” he told lawmakers.  Many will agree, but they might not be thinking about the garden variety mortgage applicants to which Mr. Mozilo was referring.  What role more lofty figures had in pushing out subprime loans, and who benefited from the resulting torrent of fees and record bonuses, will be something regulators and legislators should be looking at more closely.

The group of CEOs and directors who appeared before the comittee managed to slice and dice their compensaton decisions so much that they looked like they came out of a boardroom Veg-O-Matic: the pay wasn’t for this year, it was for last; it wasn’t severance, it was deferred compensation; it wasn’t a bonus for this year, it was payment for previous excellent performance. They said they actually lost a lot of money when the stock went down, just like all the other shareholders. Except most other shareholders did not head the company and make the wrong decisions. Most did not run up record losses and most did not receive tens or hundreds of millions in stock options and bonuses and salaries bigger than the state of Texas. One more thing: the process, they testified, is all fully in accord with the Business Roundtable guidelines on CEO compensation. Now that’s a really high bar. The Roundtable is made up of America’s top and best-paid CEOs. The ranking Republican on the Committee, Rep. Tom Davis (R-Va.), called the Business Roundtable guidelines the “gold standard” for corporate compensation. Is that because it makes sure the CEOs get all the gold?

Astonishing even for this group, when asked by Rep. Paul Kanjorski (D-Pa.) if there was any amount they would consider to be too much, there was silence, punctuated by self-serving proclamations of satisfaction with the way things are. All reassured the committee that they were not underpaid, however, and thus a sigh of relief was heard across the country.

America is experiencing one of the worst economic downturns since the Great Depression. The brokerage and mortgage lending industries played the central role in creating this contagion. But if high CEO pay is truly linked to performance and is good for the economy, people will want to know why it is, during a period that has seen the largest transfer of wealth from investors to the boardroom in history, the result is now one of falling stock values, shrinking economic growth, galloping home foreclosures and mounting job losses.

The hearing this week gave a rare opportunity for business leaders to admit that CEO compensation has gotten out of control and that it’s time for a new reality show in the boardroom. What began with the attendance of prominent CEOs and boardroom luminaries ended with the spectacle of men twisted like pretzels, having engaged in every type of contortion to show that these compensation arrangements were reasonable and had nothing to do with decisions to pump out more fee-generating subprime loans and structured investment vehicles. They also sent a veiled warning: any change to or reduction in the way CEOs are compensated, and capitalism as we know it may not survive. Here’s a bulletin for the boardroom: capitalism may not survive the kind of leadership that permits an ever increasing gap between CEO pay and everyone else’s, rewards failure with multi-million dollar bonuses and severance, and sees CEOs spinning off with a king’s ransom while leaving everybody else in the dust.

This was an opportunity for real leaders to admit that there are serious problems between the leadership class of capitalism and those who depend upon it for their well-being. To stand up and acknowledge the trend toward excess, to take the lead in stepping back and not being the first in the lifeboat when disaster strikes, to show some meaningful sacrifice at a time when so many are hurting instead of flashing five figure watches, five thousand dollar suits and a tan direct from the winter mansion at Palm Beach (or Palm Springs) -this would have been the kind of leadership that CEOs showed during two great wars and other times that tested America. This group showed none of that. One suspects they are, regrettably, an accurate reflection of the pool of CEOs and directors of which they are a part.

Excessive CEO pay has become synonymous with what is worst about American business: crony boards where one back scratches the other; compliant compensation committees made up of past and current CEOs; and an ethical value system enabling displays of greed and over indulgence that is not something parents generally want to impart to their children. It has been associated with every scandal from Enron and WorldCom to Nortel and Hollinger and countless failures in between. It is now a contributing factor to the recession that is unraveling the world’s credit markets and crippling economic well-being for millions.

What was obvious, too, from the testimony is that none of these CEOs and business leaders is possessed of superhuman ability. All seemed rather ordinary in the insights they offered and in the information they imparted, despite being recipients of extraordinary compensation and a corporate publicity machine that makes superman look like a slacker.

Despite the number of experienced CEOs and directors who appeared before Congress this week, one voice was distinguished by its absence: that was the voice of genuine leadership. America is entitled at a time of crisis to more than the spectacle of hugely paid, decidedly self-satisfied CEOs who feel that the system is working as it should. It needs leaders who recognize there is a need to restore public confidence in capitalism and the ethics of those who steer it. And that requires shared sacrifice and an understanding that, even in the great American boardroom, there are limits to what rational people both need and deserve.

Capitalism, like any household, should be governed by values, and not just who can get the most as quickly as they can. And so the actions of the CEOs and directors who appeared before Congress this week, and the failures of their boards that produced these results, is our choice for the Outrage of the Week.

Outrage of the Week: Canada’s Feeble House of Commons Ethics Committee

If it were a crime for legislators to bring discredit to parliament, the MPs investigating cash payments to a former prime minister would long ago have been carted off and locked up.

outrage 121.jpgA lot of people I have talked with over the years view Canada’s system of government as something akin to a relative without personality: they’re nice enough to invite to the party but nobody will be terribly disappointed if they don’t show up.

Canada’s parliamentary-style democracy lacks the history and majesty of the British and misses out on the vigorous checks and balances that define the U.S. system. Its politicians, except for the few rare figures like Lester B. Pearson and Pierre Elliott Trudeau, seldom stand out on the world stage. And if you happened to be watching the action in Ottawa this week, the experience would have caused you to have an even lower opinion about how Canada is governed.

The House of Commons ethics committee investigating cash payments to former prime minister Brian Mulroney (he had always denied receiving any until recently, and those assurances formed part of the basis for the federal government paying out $2.1 million to settle his lawsuit with it in 1997) held more of what can only be charitably called hearings this week. It’s a committee that has demonstrated a chronic inability to engage in a straight line of inquiry with anything approaching discerning and well-researched questions. Even the fact that while he was prime minister, envelopes of cash were regularly being dispatched to the first minister’s official residence every month, seems to have gone over members’ heads. Can you imagine the scandal that would erupt in Washington if a former presidential chief of staff admitted that cash payments were being delivered like pizzas to the president and first lady at the White House? In Canada, it barely elicited a shrug.

Over the years, I have frequently been asked to testify before committees of both Canada’s House of Commons and Senate on ethics and governance issues. The experience generally leaves me astonished at the lack of preparation revealed in the questioning. But this House of Commons ethics committee really takes the prize.

Its members are often juvenile, unprepared and disgustingly partisan. Questions are disjointed and answers rarely followed up. The committee looked like a ship of fools when it was interrogating the former chef at 24 Sussex Drive, the prime minister’s official residence. Yes, I mean chef as in top cook. The committee seemed stunned that he had nothing of value to offer that would assist in its deliberations. A soupcon of arsenic might have been in the public interest.

One member of the committee has the unimpressive habit of curling his finger through his hair, which he wears with bangs, while questioning witnesses. The “questioning” part is generous; it’s really a whine delivered while mumbling.  Other members are so far over their heads that it is painful to watch. The committee chair lets the witnesses decide if they want to take an oath to tell the truth at the beginning of their testimony. His pedantic displays and facial contortions of impatience make all the lame vice principals I have known look like paragons of manliness and virtue. So lacking in backbone is this committee and its chair that when a witness refused to give evidence unless the chair recused himself, Liberal MP Paul Szabo obliged and turned the gavel over to another member. Try pulling that stunt on Chris Dodd, chairman of the U.S. Senate banking committee, or Barney Frank, head of the House financial services committee.

Yesterday, Canadians learned that Mr. Mulroney is refusing to re-attend the hearings to answer further questions. His lawyer claims he doesn’t need to and that he wants to move on. So now it’s the subjects of investigation and their lawyers who are running the show. The committee, which has the power to summons witnesses, apparently is not going to demand that the man who stands at the center of its inquiry, appear again. If it were a crime for legislators to bring discredit to parliament, the members of this committee would long ago have been carted off and locked up.

Canadians over generations have nobly opposed the onset of tyranny around the world and for that reason and others they are a people who deserve respect among the ranks of those who value freedom. It is a shame that they are so often underserved by the mediocrity of their elected representatives.

The ability of law makers to hold meaningful hearings on significant matters of public policy has been a central feature of American democracy. How many failures, cover ups and scandals would have gone undetected if it had not been for the fact that Congress can actually assert itself and demand answers? Testifying is generally not an option as a long line of figures from John Dean to Roger Clemens have discovered. It’s part of the checks and balances that make the American system, for the most part, the closest thing to a model of sound governance in the world today.

As this week’s antics in Ottawa revealed, the Canadian system is often so far removed from that model it’s hard to believe it inhabits the same planet, much less the same continent. The Ethics Committee of Canada’s House of Commons was given an important opportunity to strengthen public confidence in the political system. Instead, it did the opposite, which makes it our choice for the Outrage of the Week.