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.

The Titanic of Ironies

titanic-sinks-new-york-times-thumb1The calamity of the ship which was thought too big to sink did not capsize the company that owned it. But the White Star Line, which had roamed the seas through wars, depressions and revolutions since the mid-1800s, was unable to survive the greed, hubris and deceit of one man. It is an experience that carries some valuable lessons for today’s financial empires and Wall Street titans as well.

On a crystal-clear, star-filled April evening in 1912, what had been to that point an astonishing triumph of human imagination and engineering suddenly changed into a tragedy on a horrific and incomprehensible scale. It was 11:30 pm on the night of April 14th when the ship’s lookout called down to the bridge. What took millions of words in plans, designs, work orders, contracts and printed material was about to be undone by a mere three: “Iceberg right ahead.” The second officer then made the fateful, and, by most later accounts, calamitous, decision to stop and reverse propellers. Less than three hours later, in the early morning of April 15th, RMS Titanic descended to the bottom of the Atlantic Ocean, taking 1,517 souls with her.

One who did not perish that night was the chairman of the Titanic’s owner, White Star Lines. J. Bruce Ismay’s survival was not exactly miraculous. Fulfilling Montaigne’s aphorism, Ismay did not enjoy the reputation of a hero because of his escape that night, either to the general public, who tended to vilify him as coward, or to his valet, Richard Fry, who was not as fortunate as his master in avoiding the cold clutch of the cruel sea. William Henry Harrison, Ismay’s secretary, also went down with the other 1,516 men, women and children.

The disaster, and all the morbid press it generated, along with hundreds of lawsuits, did not end the White Star Line, however. It steamed on for some years, until it was bought up in 1927 by Lord Kylsant of Carmarthen, becoming a part of the Royal Mail Steam Packet Company, the largest shipping empire of the time.

Lord Kyslant had a well-deserved reputation as something of the “Napoleon of the seas” for his ability to conquer his competitors and impress investors. Like Conrad Black -or Lord Black of Crossharbour, as he prefers to be known even while residing at the Coleman Correctional Facility in Florida- he steered a course of deference-producing success until it was halted by an encounter with prison-confining deceitfulness.

He was a larger-than-life figure in London’s business and social circles, acquiring many honors along the way. He financed his empire through massive amounts of debt and the generous use of other people’s money. The Royal Mail was a darling of the stock market at the time and both its fortunes and Kylsant’s own lavish life style required that the shares of the company be kept high. Like others before and after him, Kylsant made a decision at some point that if his business could not be made to look good on its own merits, a little fudging with the figures might help. So it was in 1931 that Kylsant found himself charged with accounting fraud and was later sent to prison for a year. Lord Kylsant’s long fall from grace shocked the world and led to the disintegration of the company, including the fabled White Star Line. There was a British government-forced merger with Cunard, but White Star never sailed again or operated under under its own flag.

In an irony as large as the name Titanic itself, the calamity of the ship which was thought too big to sink did not capsize the company that owned it. But the White Star Line, which had roamed the seas through wars, depressions and revolutions since the mid-1800s, was unable to survive the greed, hubris and deceit of one man.

Somewhere in all of this, even without the benefit of the binoculars that the Titanic’s lookouts did not have (they were locked in a cabinet and the key was misplaced during the ship’s test runs), one might discover a lesson about the recent financial disaster that has been unleashed upon the stock market and the global economy. Its cause was not natural or celestial; it was not preordained or the result of an asteroid hitting the earth. It was brought on by more common suspects: everyday greed, a giddy sense of intoxication induced by fast money that made a whole crew of business decision-makers and investors laugh at the unfashionable attire of of risk, an obliviousness to duty (and even common sense) on the part of directors and regulators, and an epidemic of self-delusion afflicting too many CEOs and Wall Street titans that they, also, were too big to fail and too smart to ever encounter the sudden reversal of the propellers of fortune.

Editor’s Note:

My father, Jack, was a keen student of the Titanic’s history and misfortune, and believed that it held many useful lessons for the lives of leaders, institutions and their followers.  He would have been 85 today. This posting is dedicated to his memory.

The Less than August Summer of Conrad Black

The Hollinger newspaper empire he once ruled sputters to an ignominious end; the appeal he boasted waxed the floor with the prosecution results in unanimous defeat.  Even his prison garb pant legs defy the once exacting baronial standards of symmetry and perfection.

August has not been good for Conrad Black, who is spending his first of many summers as inmate No 18330-424 at the Coleman Corrections Facility in Florida.  Whatever else a life of curtailed freedom has done to him, a once legendary obsession with the requisite symmetry of pant legs, ably assisted by the fabled tailors of Savile Row, seems to have been among the earliest casualties of Mr. Black’s institutional experience.

As we noted first on these pages some months ago,  he is the only member of the British House of Lords to have been convicted of corporate fraud since Lord Kylsant of Carmarthen in 1931.  Lord Black’s business empire has also followed the path littered by Baron Kylsant.  Shares of Hollinger Inc., the holding company he controlled, have been delisted from the TSX for failure to file financial statements.  They would only confirm what everyone already knows: Hollinger is finished.  Its connection with its last meaningful asset, the Chicago Sun-Times, has been ended as a result of a litigation settlement.  It now has no business other than suing and being sued.

Mr. Black inherited the now disgraced Hollinger name from the Argus Corporation, an empire he pretty much inherited, too, with a little cunning assistance in the process.  It was once a hugely profitable force in Canadian business.  Now it is all but ashes.  The great assets it controlled, from Massey Ferguson and Standard Radio to Crown Trust and Dominion Stores, were long ago dismembered and sold off by Mr. Black.  Trading in even its slim float of stock is about to be terminated.  Shares will be delisted from the TSX later this month because of a failure to file financial statements.  The Sun-Times Media Group, formerly known as Hollinger International and once the thriving centre of Mr. Black’s newspaper chain replete with celebrity directors like Henry Kissinger, struggles each day under a towering mountain of debt and losses.

Here, the fate of Mr. Black and the companies he headed reprise with eerie accuracy a script written decades ago.  Like the Titanic of the White Star Line he controlled, Lord Kylsant’s Royal Mail Steam Packet Company soon disappeared after his incarceration.  Lord Black’s empire likewise vanished into an ocean of overweening ego, unmanageable debt and boardroom fraud. And like Lord Kylsant, Lord Black also lost out on his appeal of a jury conviction for fraud.  His request for a review of that decision was rejected last week by the 7th U.S. Circuit Court of Appeals, leaving an appeal to the U.S. Supreme Court his only, and decidedly unlikely, course for hope.

One important difference between the fate of the Royal Mail shipping empire and Hollinger, however, is that in the former case, Lord Kylsant was found to have acted as a lone wolf in the fraud.  At Hollinger, the thieves came in a pack.  Today, one of the most underreported records in the annals of contemporary business is that there are more Hollinger directors currently serving time in U.S. federal prisons than there have been of any other publicly traded company in modern corporate history.  In addition to Mr. Black, David Radler, once his top lieutenant, Peter Atkinson and Jack Boultbee are now inmates at various locations of the U.S. Bureau of Prisons.  Mark Kipnis, a Hollinger lawyer who was also convicted of fraud, was permitted to serve his time under house arrest.

One might add to this list of miscreants the name of Alfred Taubman, the shopping center king and Hollinger director who was convicted of price-fixing in the fine art business.   Just as Mr. Black’s friends at the Toronto-based National Post and New York Sun remain unbothered by the idea of a convicted felon serving time writing op-ed columns in their newspapers, Mr. Black and his fellow directors saw no ethical conflict or optical distortion in Mr. Taubman’s continuing to serve on the Hollinger board from the confines of his prison cell.

This should have been seen at the time by the media and Hollinger investors, as it was by us, as a huge red flag in the governance and ethical culture of the company.  The same might be said for the archaic, management-dominated structure of the board of directors at Hollinger. Those who display such open contempt for shareholders and sound governance may also manifest their disdain and flawed judgment in less visible but equally costly actions.  As they did in spades at Hollinger.  As noted before on these pages, when we tried -in the 1990s- to raise the role Lord Black’s dubious governance practices played in Hollinger’s byzantine constitution -including the strange and ill-defined part by Ravelston, the private holding company he also dominated- Canada’s major business newspapers showed not the slightest interest.

There are those who ask how such noble and respected corporate entities as Hollinger and Argus could end up as little more than scattered bones in a bleak and litigious landscape of failure. To that the response must be that when a boardroom is stocked with enough felons to fill a minivan, it is unlikely that any other outcome would have been possible.

With such a legacy, in addition to his present status as a serving felon, we are again prompted to wonder why Mr. Black continues to hold national honors from the country whose citizenship he renounced several years ago.  Much has been made in some quarters of the fact that he is still a member of the esteemed Order of Canada.  Less has been noted of his position as a member of the Queen’s Privy Council of Canada, a post generally reserved for past and current members of the federal cabinet.  An exception was made for Conrad Black to be elevated to the position, under former prime minister Brian Mulroney.  How does it reflect upon the image of Canada in anything but a discreditable light, that such honors can still be enjoyed by a convicted felon.  On this point, if nothing else, Lord Black of Crossharbour parts company with Lord Kylsant of Carmarthen.  Shortly after he lost his appeal and was sent packing to Wormwood Scrubs prison, Lord Kylsant was stripped of his most important honors and titles, except for his membership in the House of Lords, which would have taken an act of Parliament to remove.  It was a small saving grace.  He never returned to that storied institution.

It is perhaps a sign of a different era we live in when a man can steal from his shareholders and be convicted of obstruction of justice while still having his opinions published in widely read newspapers and the string of awards and honors that follows his name remain undisturbed.

Men of money and social status whose favors are always sought out are typically the recipients of awards and impressive rank.  It is the way of the wealthy and well connected to help one another in their moves ever upwards.  Conrad Black has enjoyed considerable assistance in this regard over the years and has accumulated an impressive array of letters after his name.  But for this once most favored son of the Canadian establishment to whom so much was offered, the title that defines him most in the eyes of the law and of society is that of convicted felon.  For that, Mr. Black owes nothing to his friends or family or the insiders he so carefully cultivated over the course of a lifetime.  He earned it entirely himself.

As for his self-serving columns and email messages declaring that regulators and the judiciary in the U.S. have much to answer for in the destruction of shareholder value at Hollinger and characterizing American law as being “a venomous roach, enforced by rattlesnakes and adjudicated by hyenas,” I suspect Conrad Black himself will discover that prison is not intended to be a bastion of self-indulgence and verbal attack and that authorities will soon tire of his scathing denunciations of the “tedious persecution” that he claim has afflicted his life. He writes that he looks to Gandhi and Sir Thomas More for inspiration and likens his plight to those of these icons of moral courage.  A more apt comparison would be to Charles Ponzi, Bernie Cornfield, Robert Vesco and those of similar symbols of moral bankruptcy.

At every stage along with way since his legal travails began, he has miscalculated, misspoken and misapprehended the force of the reality that was marshalling against him.  Jurors who go to the trouble of serving the public interest at not inconsiderable personal sacrifice ought to be spared the behind-bars public tirades of prisoners who continue to berate the judicial system and dismiss their verdicts as “nonsense.”  It is time the penal system began to treat Conrad Black as the common prisoner he is and not the celebrity guest he prefers to portray.

Conrad Black: Lord of What Might Have Been

How strange it is that success can be such an impostor and only a warm-up for the main act of self-inflicted tragedy yet to arrive.

When Lord Kylsant of Carmarthen lost all hope of appeal in 1931, the wealthy titan was taken off and spent the next year in London’s bleak Wormwood Scrubs prison. Until Conrad Black, he was the only member of the British House of Lords ever to be convicted of fraud in the management of a publicly traded company. While prison was a stunning downturn for this Napoleon of the seas, as he was called for the formidable shipping empire he created, he had a private cell and was permitted to have his meals brought in from a first-class caterer.

Conrad Black, the first British peer to be incarcerated in the history of the United States, will not be so fortunate. There will be no privacy in his lodgings at the federal correctional complex at Coleman, Florida, and his meals are unlikely to be catered by his favorite Palm Beach restaurants.

He will doubtless persist in proclaiming his innocence on all charges and maintain that full acquittal on appeal is a virtual certainty. In reality, the man who often sounds like some character out of Charles Dickens, and not one of his more sympathetic protagonists at that, stands a greater chance of stringing all his prodigious and weighty words together and scaling down from his prison window past the unsuspecting eyes of his less than erudite guards.

There would have been many steps that could have been taken along the way to avoid the hard thud of the prison gates that swung closed behind him today and will remain so for most of the next 78 months. Much less brilliant men might have taken those other paths. One of the many mysteries that masks Conrad Black is why he did not.

He has spent considerable time over the past few years describing his role as a “freedom fighter” and threatening to take on the cause of prosecutorial overreaching. His friends claim that becoming an anti-corporate governance zealot remains a distinct possibility for this man of many talents. Whether anything will come from his newfound role as the Rubin “Hurricane” Carter of wrongly convicted corporate felons is yet to be seen. A predicate for such interest in the abuses of the criminal justice system or the plight of the less fortunate has never figured prominently in Conrad Black’s writings or those of the high profile friends that now rail at his injustice, for that matter. And it is a hard case to make that a man who has been able to spend tens of millions mounting the best legal defense possible -tens of millions of other people’s money via the shareholders of the former Hollinger International- was disadvantaged or the victim of abuse by the legal process.

A case can be made, however, that there was a greater transgression at work here than the one for which Conrad Black was convicted. For many years, hundreds of millions in fees and payments were siphoned from Hollinger and paid to Ravelston, the private holding company run by Black and Radler, which itself turned out to be a corporate felon. The outrage is that those payments were fully approved by Hollinger’s board without batting an eye. Yet most directors, according to company documents, didn’t understand why the payments were being made or even the purpose of Ravelston. Corporate governance at Hollinger was little more than a social club where directors partied and ate fine lunches and in the end seemed to have little energy left to do anything more than lift their Conrad Black-supplied rubber stamp with the word YES emblazoned on it in baronial font.

There were also the injustices of the $20 million bill that the internal investigation of Hollinger chalked up under Richard Breeden, and the subsequent corporate welfare program that the Hollinger group became for lawyers, management and directors who always had their hands outstretched for another check while in effect presiding over the disintegration of the company. The fact that no laws were broken by these actors in no way lessons the outrage their actions represent.

The greatest “crime”, however, is reserved for the man at the top. In that category, one looks not at a breach of securities laws or federal codes but at the larger offense of a person who squandered the rare opportunity to influence the course of events and make the world a better place for it. Law breaking by men and women whose lives were stacked against them from the start, while never excusable, is perhaps easier to understand. When all you have known is crime and criminal influences from an early age, the ability to find a better path is strewn with obstacles. But when there is the gift of affluence and privilege from birth and great wealth, fame and power amassed along the way, as there was for Lord Black of Crossharbour, the road taken to crime offends the senses of civilized men and women to the core.

So disconnected from the facts that led him to this latest step in a progressive march downward, Mr. Black writes in today’s National Post:

We have a Toronto court to thank for the massive and misleading exposure that the grainy security film that caused me to appear furtive, has caused. We have the same court to thank for a number of other unjust decisions.

So now it is the “graininess” of the security film that caught him removing the boxes from his Toronto Street office that is the culprit, along with a string of other players from investors to prosecutors. It is they who are responsible for his fate. Not him. Never him.

I am well aware of the capacity of courts, agencies and commissions to act incorrectly when it comes to the rights of individuals. Often it is out of a lack of competence. Sometimes it is the result of malice. I have strongly condemned such conduct in the past. I wish we had heard from Mr. Black and his newspapers on this subject in the past. It might have helped to avoid a number of lives being ruined. But as I have noted above, injustice rarely befalls those with vast resources to pursue their rights in the avenues of both the legal system and the court of public opinion. And if I believed for one moment that Mr. Black had been disadvantaged by a significant manifestation of bias in the legal system, I would be the first to come to his defense. To whom among the unjustly treated, other than himself, has Mr. Black ever come to the defense?

One also is prompted to wonder, if Mr. Black has so many important facts to marshal in his defense, which are voluminously detailed in his column today (and how many other convicted felons do the publishers and editors of the National Post permit to make their appeal case in an Op-Ed column?) why on earth did he refuse to take the stand at his trial?

His Palm Beach mansion has more bathrooms than the accommodation he must now share with in excess of 180 fellow inmates. His address, which from birth included the more prestigious names in Toronto, New York, Palm Beach and London, will now be among the most infamous: the U.S. federal prison complex at Coleman. How ironic it is that the man who boasted that the prosecution’s case was “hanging like a toilet seat around their necks” may well end up cleaning such fixtures as part of his life as Coleman’s newest inmate. His newly acquired dog will have more freedom and live a life of greater splendor than will Mr. Black for the next several years. A man who has known the rarest of luxuries on the grandest scale will soon discover that the simple act of opening a refrigerator door for a glass of milk or taking a stroll down the street on a warm summer evening are things to be envied in the lives of the most common of individuals.

It is not just the contrast from a world of mansions, limousines and privileged society to one of bars, starchy food and shared showers that is difficult to grasp here; it is the reality of what might have been that will not now be; the unfulfilled accomplishments and potential successes of a man of uncommon ability, but regrettably of rather common criminal persuasion. Gone is the Argus empire he effectively inherited. Little remains of the newspaper domain he once ruled. Discarded in a foolish fit of pique is the Canadian citizenship he exchanged for a title and an ermine-fringed robe from another land. However responsible Mr. Black is for his fate, one cannot but ponder how strange it is that success can be such an impostor and only a warm-up for the main act of self-inflicted tragedy yet to arrive.

Mr. Black once boasted in a BBC interview that if he had to go to prison, he would wear the sentence like “a badge of honor.” There was no award ceremony evident as he arrived at the Coleman prison facility at noon today in a Cadillac with darkened windows. My father used to counsel that one of the tests of a bright person was the ability to make a sensible point without sounding like an idiot. Mr. Black is a bright man. On too many occasions over the past number of years in the things he has written and said (the “renunciation of the rights of the French nobility;” comparing federal prosecutors to “Nazis,” etc.), Mr. Black has sounded a few points lower than his IQ has been rated.

The tribulations that lie ahead for him will be significant, and the distress imposed on his family and friends is truly unfortunate. But the fact remains that in too many ways when Mr. Black has been the focus of hope and great expectations, he has disappointed and left those who have looked up to him feeling empty.

Conrad Black has enjoyed many honors in his life, some of which have been attached to his name. What he might have done with them and what his legacy might otherwise have been, will be a mystery forever lost in the mists of history unwritten. Overshadowing all of this is the fact that Conrad M. Black, Baron Black of Crossharbour, PC, OC, KCSG, who once reigned over an empire that saw the doors of kings, presidents and world luminaries open wide to him, is inmate number 18330-424, lord now only of his own bunk bed.

If there could be a less predicted or more bewildering turn in the life of a man, imagination fails to conjure up what that might be.

As of 8 pm EST, the Bureau of Prisons information posting regarding its custody of Conrad Black (below) had not been updated.

Is Elba or St. Helena Next for Conrad Black?

The otherwise avoidable fall of great men from high places always commands public attention and often history’s scorn.

It is difficult to know what the future holds for Conrad Black. We learned yesterday that he has been sentenced to 6 1/2 years in a U.S. federal prison. However much his friends interpret this as yet another form of vindication, as they did with his conviction on just four of the 13 counts on which he was tried, it is an unsettling prospect that looms ahead.

We know something of what became of Lord Kylsant of Carmarthen, however –the only other British peer to be convicted of fraud in connection with a public company. (more…)

The Black Touch

The same Napoleonic scale of misjudgments and miscalculations that have dogged his business decisions are now inexorably shaping Conrad Black’s legal destiny. It is one thing not to show remorse for the crimes of which one has been convicted; it is quite another to wear them as a badge of honor while striding into the courtroom on the day of sentencing.

The trial and tribulations of Conrad Black have occupied not an inconsiderable amount of space on these pages. We have tended to view him, unhappily, as a man who, though given every advantage that family, wealth and intellect can offer, has become better known for what he has lost and no longer holds than what he actually created. Now, as he faces the greatest loss of all –his liberty– it seems an apt juncture at which to revisit the depth of his descent. His situation is made even more precarious by his attacks –some remarkably strident– on the very legal system that is only days away from determining how long Mr. Black and his freedom will be estranged.

Under his unchecked control, a colossus of corporate Canada acquired by family connections and privileged access virtually disappeared. Argus, which once ran companies like Massey Ferguson, Dominion Stores, Standard Broadcasting, Domtar and Hollinger Mines became a name you read about only in Greek mythology. His newspaper empire, at one time the third-largest in the world, crumpled, leaving only the Chicago Sun-Times. The stock of what was once called Hollinger International appears headed for oblivion. In a single day last month, and for no discernible reason other than the general mess the company is in, it dropped in value by 23 percent to at slightly more than a dollar. The stock of Hollinger Inc., the corporate parent, trades for pennies. Its landmark headquarters at 10 Toronto Street, an icon of the Canadian business establishment, is also gone from his grasp, like the Canadian citizenship he once held but chose to forsake apparently for something bigger. And it is that very commodity –citizenship in the land where he was born, a rank which he held in common with millions of mostly ordinary Canadians and cost him not a penny, but which he chose to renounce– that may yet prove to be the source of his greatest misjudgment as he faces a long tenure in an American federal prison.

The Black touch of this most unMidas-like figure is seen elsewhere to varying degrees. Mr. Black was an outside director of now defunct Confederation Life, which, when it collapsed, was the largest financial casualty in Canadian history. And he served on the board of Livent, another disgraced and failed company whose founders face charges of accounting fraud and securities law violations in the United States and Canada. Ravelston, the private holding company he once controlled but which was established by a previous generation of business leaders who managed to stay out of the criminal courts, is not only a convicted corporate felon but has been ordered to pay $13 million in restitution to the shareholders whose money it unlawfully took. That is in addition to the $7 million fine it was ordered to pay last summer. To cap his business career, Mr. Black headed a board where four directors (Radler, Atkinson and Boultbee, in addition to himself) became convicted felons as a result of their crimes in the company they oversaw. Now, on top of the various honors and titles he enjoys in Canada and elsewhere, Mr. Black holds the distinction of having founded and run a publicly traded company that set a record in modern corporate history for the number of future felons it had sitting around the boardroom table. You don’t have to be a corporate governance zealot, a group which Mr. Black continues to rail against even at the eleventh hour before his sentencing, to realize that there is something staggeringly deficient in the character of a company’s leadership when it achieves this kind of milestone. Has there ever been a company so unlucky in its choice of directors? First, there was the Chicago four in the boardroom, then the hapless members of the audit committee who did not read or merely skimmed their financial reports, and finally the current crew that faces an onslaught of legal bills from the Black era now exceeding $100 million.

And yet with all of this, Mr. Black tells the BBC that he may consider a return to business in finance. “This is not an honour I sought, but it has been my honour to show the shortcomings of the plea-bargain system and the shortcomings of the corporate governance zealots” the British peer said in an interview.

Not even Lord Kylsant of Carmarthen, the towering British shipping magnate of the 1920s known for an even more towering ego –and, as we previously observed on these pages– the only British Peer beside Lord Black of Crossharbour to be convicted of fraud in a publicly traded company, displayed this scale of hubris. There was no second act for Lord Kylsant, in finance or anywhere else in society, after he was found guilty in 1931. He knew he was disgraced and at least had the good sense not to contemplate a return to the world of business where he was found to have betrayed the trust he held, much less openly speculate about it on the eve of his sentencing.

I do not intend that the foregoing be seen as anything approaching a tally of the full man. There are dimensions to Conrad Black, as there are to most people, that remain out of the public eye. Some may be reflected in his pre-sentencing submission to the court, which saw tributes and commendations flowing from significant personages. Mr. Black always portrayed himself as a proprietor, not some buy and flip LBO king. His mission was never understood or claimed to be one of selling off assets, but rather of building upon them and acquiring others. But his business achievements seem whittled down to a barely recognizable shell of their early beginnings, and nowhere near the potential that drifted into his early grasp.

Conrad Black sat at the very pinnacle of the Canadian business establishment and enjoyed every opportunity and honor it –and his native Canada– could bestow. Power, privilege and prestige were pretty much his birthright. But ultimately so much of what he has touched in business has turned from pure gold to black dust. More poignant than perhaps even what the law has declared he has done is the forever unfinished and unwritten chapter of what might have been.

It has been a painful spectacle to witness. The Napoleonic scale of misjudgments and miscalculations that have dogged his business decisions are now inexorably shaping Mr. Black’s legal destiny. With his torrent of emails, interviews, book signings and newspaper columns since his conviction in July, and now his internationally broadcasted musings about a return to business, it is hard to imagine that this is the same Conrad Black who had absolutely nothing to say to the jury in his own defence, when his words might have counted in the outcome. His combative tone and continuing attacks on the American legal system –a subject that never once moved his mighty pen before his personal legal problems began– may not cause his term in prison to be lengthened, but it is doubtful that they will assist in shortening it. It is one thing not to show remorse for the crimes of which one has been convicted; it is quite another to wear them as a badge of honor while striding into the courtroom on the day of sentencing. Why he was ever permitted by his fabled team of lawyers to steer his own bombastic ship into the legal minefield that holds his fate will always be a mystery.

When all is said and done by Mr. Black, it remains impossible to comprehend at what level of consciousness he is working. He cannot return to Canada or England. The court has ordered that he reside in either Chicago or Florida while awaiting his sentence. But in reality, it appears that Conrad Black is living in denial.

The Fall of Conrad Black | Part 1 | The Unheeded Lessons from Lord Kylsant of Carmarthen

Seventy–six years ago, the business world was rocked by another sensational trial involving corporate fraud and the scamming of investors with a prominent baron at the centre of the scandal. It did not end well for Lord Kylsant of Carmarthen. The uncanny similarities are not encouraging for Lord Black of Crossharbour.


A Finlay ON Governance Exclusive
Copyright (c) 2007 Finlay ON Governance


Considerable speculation is gathering about what will become of Conrad Black in light of his four-count felony conviction earlier this month. In that regard, the past provides a useful and rather unexpected guide. Corporate governance, which I think factored significantly in the outcome of the case against Mr. Black and his colleagues and set the stage for their eventual downfall (I will have a further posting on this in light of the verdict) actually has a history, though most of its champions don’t bother to study it.

Two decades ago, I came across a case involving boardroom misfeasance by another British baron. I found it interesting when I first learned about it, but thought it was from a different and by-gone era. I had no idea it would someday spring from my archives and take on a totally modern face. Today, in the wake of recent developments in U.S. federal court in Chicago, it is truly fascinating for its uncanny similarities to Hollinger’s demise and for its instructive value as to what might lie ahead for Mr. Black. It is not a pretty picture.

Owen Philipps, who became Lord Kylsant of Carmarthen in 1923, was born to great wealth and a prominent family, like Lord Black of Crossharbour. His ancestry could be traced back to the nobility of post-Roman Wales. And like Lord Black, Lord Kylsant attracted early praise for his business acumen. He commanded enormous respect in commercial and political circles and was then, as his baronial counterpart is today, viewed as a larger-than-life figure. At six feet seven inches, he was straight out of central casting for that role. Like Lord Black, Lord Kylsant began to assemble an empire, not of newspapers, but of ships. An admirer of Bonaparte like Lord Black, Lord Kylsant became known as the Napoleon of the seas for his tenacity in making deals and expanding his empire and for an almost single-handed domination of his company. You have to wonder what this fascination of ill-fated business tycoons with the likewise ill-fated emperor, who was given to such monumental lapses in judgment, is really about. Perhaps they should have studied more Wellington and less his conquered opponent.

Lord Kyslant and Lord Black received their titles largely because of their business successes. Some good connections no doubt helped in both cases. Lord Kylsant’s huge ego —he, too, did not suffer mere mortals gladly— was illustrated by the equally oversized “K” which he scrawled on memos and company orders to signify his approval. Lord Black is known for signing his name to emails in all capital letters.  And the two men held rare honors:  Lord Kylsant was a Knight of the Order of St. John of Jerusalem; Lord Black is a Knight of the Order of St. Gregory the Great.

In 1926, the Royal Mail Steam Packet Company, which was publicly traded on the London Exchange and headed by Lord Kylsant, bought the White Star Line, which also owned the Titanic prior to its catastrophe-destined maiden voyage. The Royal Mail was essentially a holding company for various shipping entities, which continued to operate under their own corporate flag. Like Hollinger, the Royal Mail financed many of its acquisitions by taking on enormous amounts of debt, which later proved difficult to service. By the early 1930s, the company began to fall behind in its payments to the White Star’s former owners. Soon, investors were publicly questioning the Royal Mail’s accounting practices and whether the true state of its financial health was being disclosed. Lord Kylsant, like Lord Black, initially bristled at any suggestion of irregularities in his stewardship. But under mounting pressure, and in a move that presaged Lord Black’s own actions some seventy years later, the baron responded by agreeing to the creation of a special committee to investigate the company’s affairs. The highly respected Sir Josiah Stamp —the Richard Breeden of his time— eventually submitted a devastating report that showed the alarming extent of the company’s financial deterioration and found that investors had been misled.

Lord Kylsant soon took a leave of absence from daily management of the company. Still, a criminal investigation followed and, in a move that rocked both Britain’s financial community and aristocratic society, he was arrested and charged with two counts of fraud. The mirrors of history form an uncanny reflection of the proceedings in U.S. federal court against Conrad Black. In June of 1931 a trial began in London’s historic Guildhall. The country was spellbound. The courtroom was packed. The press from around the world followed every word, along with the comings and goings of Lord Kylsant and his family in their limousines. The best —and certainly most expensive— legal minds in England, perhaps even rivaling Lord Black’s fabled team of the Two Eddies (fabled, that is, before his four-count conviction), were retained by Lord Kylsant to marshal his defense. Hundreds of boxes of documents were introduced into evidence. Prominent directors testified —as they so often do in such cases— that they were not aware of what was really happening in the company. Lord Kylsant’s lawyers mocked their testimony and asserted the board was fully informed and approved of all financial transactions and disclosures. Sounds familiar, doesn’t it? A jury of ten men and two women (Lord’s Black’s was composed of nine women and three men) did not buy that line. The central issue was that Lord Kylsant deliberately hid the true state of the company’s finances from his board of directors and the shareholders. The verdict acquitted Lord Kylsant on one count of fraud and convicted him on the other. A sentence of one year in prison was imposed.

There was great speculation at the time, as there is today with Lord Black’s conviction, about the success of an appeal, which was launched immediately. Many assumed a prominent titled member of the aristocracy would do well before similarly privileged appeal court judges and that what were asserted by the baron’s supporters to be relatively minor infractions would not be deserving of incarceration. They were wrong.

When her husband’s appeal failed, Lady Kylsant, a much remarked about figure at the proceedings, broke down and embraced the emotional baron in his last moments of freedom. The sentence was upheld and ordered to commence immediately. And so it was that this lord of the oceans who commanded one of the largest fleets of British commercial ships to sail the seven seas was dispatched into the company of petty thieves, small-time criminals and household robbers. He never set foot in the House of Lords again. He was never entrusted with other people’s money again. All of Lord Kylsant’s significant honors, including the previously noted Order of St. John of Jerusalem,  were rescinded in the months following his conviction. Struggling with public disgrace and social ridicule, not just because of his crime but also the legacy he squandered, he died a broken man in 1937. The Royal Mail sailed into virtual extinction, and the financially troubled White Star Line, which even the greatest calamity of the sea could not sink, was brought down by a scheming boardroom baron who plotted his misdeeds among mahogany tables, leather chairs and every privilege his country could bestow upon him.

The shareholders of Hollinger Inc. and Hollinger International may themselves be struck by the parallels in the demise of Lord Kylsant’s empire and the hollowed-out remains of what not long ago was the world’s third largest newspaper owner.

If, on a Christmas Eve in the late 1990s, before the twin vices of greed and miscreance had settled on Lord Black’s mind, the ghost of Lord Kylsant had been able to visit him, as Marley appeared to Scrooge in the Dickens tale, one wonders what he would have said. Would he have warned his modern equivalent to change his ways? Would he have counseled him that it profit a man nothing to gain a few dollars more only to lose his priceless freedom and precious reputation? Could anyone have persuaded an uncommonly determined man who rose from The Bridle Path to a British peerage to take a less ignoble path? Is it always the curse of larger-than-life men to surround themselves with smaller figures of little courage and a never-ending sense of obliging service? Or are there just so few men and women who will stand up to hold back the destructive tide of hubris and unquenched ego? Looking at the examples from as far back as the Royal Mail and as recent as Hollinger, a long series of rather remarkably ineffectual boardroom players, distinguished more by the outcome of their carelessness than by the product of their diligence, seems to lead to that conclusion.

It is perhaps not just Conrad Black who needs to reflect upon the events that have taken him to this regrettable point in his life. The experience carries valuable lessons for how we all deal with such titanic figures in the future, whether they be noble barons or just common variety CEOs who think they should be paid a king’s ransom.

Conrad Black is the only member of the House of Lords to be convicted of criminal charges involving a publicly traded company since 1931. It did not end well for Lord Kylsant of Carmarthen. One wonders what history will finally record in the case of Lord Black of Crossharbour.

A Finlay ON Governance Exclusive

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