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 Fallacy of Giants | Part Two

Essay by J. Richard Finlay

The blind eye which shareholders and analysts too long cast upon the abuse of excessive CEO pay is now being turned to the recent trend of monetizing ethical abuse. Who knows when the tipping point might come in the ever-widening wealth gap where capitalism is finally seen to cross the river of moral conscience and moves from being trumpeted as a source of social progress and individual incentive to one of middle class tyranny and public opprobrium. 

Continuing from Part I

One of the defining features of today’s world of big business is that, too often, shareholders have been willing to turn a blind eye to any amount of pay to a CEO, no matter how disproportionate, as long as they were getting impressive returns each quarter.  Never mind how many times poorly crafted compensation devices gave incentives to CEOs to artificially push up the stock when such growth could never be sustained in the long run.  As I suggested to the U.S. Senate Banking Committee long before the financial meltdown that traced its roots in part to unsound compensation schemes:

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.

Our comments on these pages and elsewhere over the years have also attempted to rebut the most common justifications frequently advanced by boards as to why CEO pay needs to be at the level to which it has skyrocketed.

But the inescapable lesson of history appears to be that no boardroom scandal or financial meltdown is so great, no gap in wealth or income is so wide, that it will deter CEO pay from its self-appointed destiny of creating the wealthiest professional class in the history of the world.

Now a view is emerging in many boardrooms and on Wall Street that appears to regard ethical and legal transgressions, even the kind that result in multi-billion dollar fines, penalties and settlements, as mere transactions.  This is the case with JPMorgan Chase, whose profitability is so vast its shareholders are prepared to accept a record settlement with the U.S. justice department for $13 billion (among other penalties) as just another cost of doing business. The stock has risen 28 percent in the past 12 months.  Other examples abound, including Bank of America’s $9.5 billion to settle government actions involving federally insured mortgages, $1.2 billion paid out by Toyota and $7 billion in penalties by drug makers GlaxoSmithKline, Pfizer and Abbot.

It is not as if the ethical and legal dimension of business has suddenly dropped onto the corporate landscape unexpectedly. There are more compliance officers and university think tanks on ethics than at any time in the history of business.  Every publicly traded corporation has a code of ethical conduct. Company websites all make reference to being committed to the highest standards of ethics and honesty.  Most CEOs will give an annual keynote speech somewhere showcasing the social responsibilities of their business.  I’ve written many of them over the years myself.   Enron had a stellar reputation for commitment to high ethical standards.  Its CEO, Ken Lay, liked to be known as “Mr. Business Ethics.” But between the words and the actions of too many companies there falls an ethical shadow.   It is much easier to simply assume a standard of ethical performance than it is to subject it to the scrutiny and testing it actually requires.

History is littered with the bleached remains of fallen giants, even of the corporate species. Nortel and BlackBerry not long ago led their industries. Today, one has vanished and the other is quickly disappearing.  Some years ago another Canadian institution, Royal Trust, collapsed under the slumbering eyes of inattentive directors and stunned regulators.  Livent was North America’s largest publicly traded theatrical entertainment company. But its most artistic accomplishment came in the form of the highly creative, but decidedly unlawful, accounting engaged in by its Toronto-based founders Garth Drabinsky and Myron Gottlieb, who both swapped the company’s swank Manhattan condo for sentences in a Canadian prison.

General Motors had a hammerlock on the North American auto market that was thought to be unbreakable, until it limped pathetically to the wicket of government assistance and declared bankruptcy.  The “new” GM is today being rocked by the lingering effects of a culture that dismissed the risk of customer deaths from defective ignition switches as an acceptable business cost. Microsoft, once the dominant force in consumer software to the point where it actually fixed prices, has been reduced to selling software for competing Apple iPads on the rival iTunes store as consumers abandon its signature Windows software in droves.  And to the pantheon of vanished business icons, Bear Stearns and Lehman Brothers are now fully inducted, as are their former leaders, Jimmy Cayne and Dick Fuld.

Like many other companies, they were lost to the all-too-common, but entirely avoidable, affliction of hyper-ego and deficient common sense.  Before the crisis that claimed them, we often asked here if some of these companies actually had a real board of directors, since it seemed there was little evidence of them when they were most needed.

In situations like these, and in many others, when disaster strikes the board of directors typically professes surprise and claims to have no idea what could have caused it.  Memo to board secretaries everywhere: Have a full-length mirror installed in the boardroom.

The idea that there are few outcomes that are not insurmountable when a company skates over ethical and legal boundaries, that a board can throw money at any type of egregious conduct to get past it, is fundamentally subversive to the well-being of both capitalism and society. It feeds the delusion, commonly held by many who enjoy great wealth and power, that certain companies are endowed with a financial shield so impenetrable it makes them invincible to the consequences of their actions.  This same view creates a culture of moral hazard where the scale of the transgressions, and the costs necessary to remedy them, inevitably keep getting bigger and bigger until the unthinkable calamity occurs.  As the lessons of the great financial crisis of recent years demonstrate, when the unthinkable does happen, the CEOs whose misjudgments caused it have long fled with their trove of stock options profitably cashed out, while ordinary shareholders, and occasionally taxpayers, are left to pick up the pieces.

Far more important than the loss of any one giant, however, is the integrity of the system of capitalism itself.  Capitalism cannot survive if its leaders, guardians and gatekeepers remain willing to tolerate such costly misbehavior.  Nor will society, whose support it requires, endlessly abide a system that does not convincingly demonstrate that it recognizes a sacred obligation to the public for upholding a standard of ethical conduct that goes well beyond what has been evidenced by many firms in recent years.  Lest there be any doubt, twice in the past 100 years, capitalism has effectively turned to government for its very survival in what amounted to a public bailout from the epidemic of excess and misjudgments that led to massive job losses and social dislocation.

It would be the height of folly for the titans of Wall Street and elsewhere to conclude, as a result of these recent multi-billion dollar settlements, that they can simply write a cheque and continue on with business as usual whenever moral impediments stand in the way of increased profitability and outsized compensation.

Business has misjudged the reaction of society to a number of major issues over the years, from the dangers to food safety and the exploitation of child labor to threats to the environment and the need for safer cars.  The results were not particularly welcomed by business nor were they predicted by it.  And the business world did not exactly distinguish itself by the silence of its leaders in the early phases of the subprime meltdown or for presiding over an inadequately governed system that let America down to the point where corporate welfare through the generosity of government became capitalism’s only hope.  When high profile tycoons like former GE CEO Jack Welsh and Home Depot’s billionaire co-founder Ken Langone bemoan the expressions of antipathy toward Wall Street and big business, voicing puzzlement over its cause, as they regularly do on CNBC, for instance, they betray a larger disengagement from the forces that shape the social and political dimensions of modern capitalism.

Who knows when the tipping point might come in the ever-widening wealth gap where capitalism is finally seen to cross the river of moral conscience and moves from being trumpeted as a source of social progress and individual incentive to one of middle class tyranny and public opprobrium.  A firestorm of outrage may be in the waiting.

In that context, it is not unreasonable, and certainly not imprudent, to suggest that if a more fair and honest culture consistent with the core values with which America has always approached its concentrations of power, is not soon embraced, if the idea that ethical abuse can be monetized is not quickly dispelled starting with capitalism’s most valued icons, the costs to investors and to society will be measured in more than the Sagan-like billions and billions tallied thus far.

The Fallacy of Giants | Part One

David and GoliathAn Essay by J. Richard Finlay

on corporate integrity in the post-bailout era

Recent multi-billion dollar settlements involving Bank of America and JPMorgan Chase show the staggering costs of ethical folly and the culture of moral hazard that places too many companies, and capitalism itself, at risk.

It is the curse of giants to believe in their own invincibility.  It is also the curse of their acolytes, as the White Star Line discovered with its “unsinkable” Titanic and the Philistines learned with the defeat of their champion Goliath at the hands of a young shepherd boy.  Yet these lessons, and countless others, over millennia have not dispelled such illusions in the world of business, where size is seen as an insulator against all manner of misadventures and the too-big-to-fail mentality shows few signs of abating.  Indeed, the extent to which America’s major banks and Wall Street icons were on the wrong track when it came to compliance with the law and standards of ethics during the great financial meltdown and even afterwards is becoming even more striking.  Recent reports involving Bank of America, Citigroup and JPMorgan Chase vividly make the point.

On these pages in the years and months leading up to the worst financial crisis since the Great Depression, and in numerous op-ed columns before that, I wrote about the dangers of relying on the myths of giants.  Until they were categorized as being too big to fail, corporate monoliths like Bank of America, Citigroup and JPMorgan Chase were viewed as being too smart to fail.  Trophy directors and fantastically compensated CEOs, with the assistance of huge PR departments that never seemed to sleep, worked overtime to present an image where success was virtually guaranteed.  The reality, however, was that too many boards were recklessly disengaged from what was happening around them.  Seeds of folly were being sewn by undersupervised employees more interested in creating clever short-term financial devices than sustainable building blocks of long-term business.  And too many investors and journalists had become prisoners of what I call cheerleader capture. First cousin to the condition of regulatory capture, this refers to the state where it is virtually impossible for any dissenting voices to penetrate the thundering chorus of cheers by insiders and their loud choir of supporters.

There were warning signs of the unwise effects of that mindset, to be sure.  Scandals involving security analysts, for instance, for which Henry Blodget became the poster-boy, revealed the dangers of a culture of cheerleader capture.  In too many cases, the analysts who were supposed to be delivering objective assessments of the financial health of companies enjoyed personal and career incentives that caused them to paint a more glowing picture than justified by the facts.  Citigroup was touched in several ways by that scandal.

There were the accounting frauds at Nortel, Enron and Worldcom that were so stunning they resulted in landmark legislation known as the Sarbanes-Oxley Act being passed.  The collapse of Hollinger and Livent provided an interesting coda to those scandals. If these events of just a few years earlier had been taken seriously, they would have produced a higher standard of boardroom oversight that might have prevented the blunders and financial chicanery that brought the world to the brink of the financial abyss in the first decade of the 21st century.

But even before the gales of that crisis rose to full force, this space questioned the governance practices of companies like JPMorgan Chase, Citigroup, Bank of America, as well as Countrywide and Merrill Lynch, two institutions which BofA bought.  We took frequent issue with the sweetheart boardroom deals that propelled their CEOs into the super-compensation stratosphere.  We felt that the excessive deference accorded many CEOs reflected a perilous level of disengagement on the part of boards which in turn were failing to exercise the independent judgment needed to fully protect investors and the public franchise of capitalism itself.

Many of the decisions these companies made were fraught with ethical failures, violations of the law and just bad business thinking.  Their consequences are coming home to roost even years later.  Bank of America recently agreed to pay $9.5 billion in fines to settle civil lawsuits with U.S. federal housing authorities.  Ken Lewis, the company’s former CEO, settled with regulators by paying $10 million personally.  All told, it has cost BofA some $50 billion to resolve a variety of claims stemming from the subprime era, including the fraudulent actions of Countrywide Financial and misleading statements made in connection with the bank’s purchase of Merrill Lynch.

Improprieties at JPMorgan Chase resulted in an astonishing $20 billion being handed over to various regulatory authorities.  The amount barely caused a ripple on Wall Street, where reaction to the announcement registered nothing untoward in respect of JPMorgan’s stock or the reputation of its CEO, Jamie Dimon.

Citigroup, which has also paid out huge amounts to settle regulatory claims, recently failed the Fed’s financial stress test — for the second time in two years.  Its stock languishes at the unconsolidated 1-for-10 equivalent of the same $5 range it was at during the bailout crisis. Were its recent history of losses, bailouts and scandals not sufficient, there are new regulatory and legal issues arising from a potential fraud involving Banamex, a Mexican subsidiary. In one day early this April, Citigroup’s shareholders were hit with a double whammy.  The company said that it was unlikely to meet a key profit expectation it had set and then announced it was paying $1.12 billion to certain investors to settle claims stemming from mortgage securities sold before the financial crisis.

Yet the level of shareholder outrage one might think would be directed at Citigroup’s board for this Job-like litany of woes has, for the most part, failed to surface, just as tolerance of years of poor boardroom practices and bad decisions earlier led to a cascade of scandals and financial losses culminating in the bank’s  liquidity crisis that prompted the U.S. government bailout in 2008.

In no case has any banking or Wall Street executive faced jail time as a result of the misdeeds that resulted in these record massive payouts or those of other companies.  By contrast, in any given day on Main Street, courts routinely hand out jail sentences to elderly seniors convicted of  shoplifting and single mothers who pass bad cheques for even small amounts.

Like the notion of billions and billions of stars in the cosmos often attributed to the late Carl Sagan (with the help of Johnny Carson), it is hard to get the mind around the scale of these fines, payouts and penalties.  And in the case of Bank of America and JPMorgan Chase, and numerous other companies from drug makers to car manufacturers along the way, it seems nobody is even trying.

What seems to be happening instead is that the wrong-headed mindset that gave birth to excessive CEO pay has infected other fields of business responsibility and decision-making.  We explore this further in Part II.

Outrage of the Week: Democracy’s Muted Voice at Davos

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How much further will it go to appease the non-democratic holders of oil wealth or American debt? After its major banks and corporations have succumbed to the influence that multi-billion dollar investment stakes invariably enjoy, will American foreign policy someday become a commodity to be bought and sold like offshore-made pieces of patio furniture at a local Wal-Mart?

There have been many voices at the World Economic Forum this week. There were the voices for combating climate change and the fight against poverty in Africa. There was the voice of Bill Gates, who, judging by media reaction and the response at Davos, single-handedly invented the concept of responsible capitalism. All these are worthy objectives. But one voice seemed notably muted: the voice for democracy. (more…)

Outrage of the Week: The Crumbling Pillars of Public Confidence

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Merck pays out nearly $5 billion to settle Vioxx claims, Yahoo incurs the wrath of legislators, and another poisoned child’s toy made in China is recalled. The growing credit market implosion threatens recession. These are the predictable consequences of the subprime leadership and ethics in our boardrooms and in our institutions of government over the past number of years.

The Outrage generally prefers to focus on a single event. This week, however, there was a common theme among several events. There was the Merck $4.85 billion settlement over its Vioxx debacle. Next, there was the appearance of Yahoo CEO Jerry Yang before the U.S. House Foreign Affairs Committee to answer questions about his company’s turning over information that led to the arrest and imprisonment of Shi Tao, a Chinese journalist and political activist.

The week ended with revelations that yet another toy made in China contained toxic chemicals and with officials ordering that Aqua Dots, distributed in North America by Toronto-based Spin Master, recall more than four million units.

What these incidents share is a betrayal on the part of the companies and leaders who could have done better, but failed miserably in their ethical performance. Merck is one of the world’s leading drug companies, yet it continued to market this highly profitable product even after company officials were warned by their own medical researchers of serious problems.

The company pulled Vioxx off the market in 2004, citing increased cardiac risk. But, as the Wall Street Journal reported at the time, Merck had earlier indications of serious problems. A March 2000 internal email shows company research chief Edward Scolnick warning that cardiovascular events “are clearly there.” Still, Merck continued to deny any link between heart attacks and Vioxx.

Yahoo is a company founded and headed by a brilliant billionaire who one might have thought had enough money and youth to still have a social conscience. But doing business in a multi-billion consumer market headed by a corrupt authoritarian regime was too tempting to resist, it seems. And so it was that Yahoo became an adjunct of the Chinese secret police –spying and snitching on its customers and thereby poisoning a name and a brand that had become known world-wide for its sense of innovation and exploration of the limitless knowledge held in cyberspace.

We don’t know who is really behind this latest toxic threat to our children. And maybe that’s the real problem here. Distant manufacturers operating under opaque regulations and dubious enforcement, vague distributors, off-shore companies and the lure of huge profits all conspire to put health and safety way down the line and out of the mind of any responsible entity. These kinds of incidents have happened too often in recent months to be a mistake. They reflect a cultural and ethical deficit endemic to the way global business is being done with despotic regimes.

Among the factors that are causing a crumbling of the pillars of confidence, the subprime mortgage scandal also figures prominently. Here, once again, the too-clever-by-half characters who concocted these elaborate schemes and got paid a sultan’s treasure for their efforts have turned out to be not quite as clever as they wanted us to think. It is unlikely they will have to repay any of the stratospheric bonuses they were receiving while creating these artifices that, like the bubble and the Enron-era accounting shenanigans, foolishly attempted to defy the rules of basic economics and common sense as only those infused with the curse of hubris will do.

And the figures touted for their wisdom and vigilance who are supposed to be monitoring the actions of these other bright fellows whom history has shown to have gotten carried away with themselves on more than a few occasions, seem not to have been as wise and as vigilant as advertised. Having underestimated the effects of these toxic credit toys before with assurances that the subprime mortgage defaults would not intrude into the broader economy, one wonders if they are any better prepared for the wider economic crisis that seems to be looming.

There will be many casualties before the full extent of the great unfolding 21st century credit debacle is over. There have already been a few CEOs who are taking a very well paid early retirement. More will follow. Some companies will not survive. The stock market will continue to experience unsettling jolts, like its more than 600 point drop this week. But, unfortunately, it will be the ordinary consumer —not the central bankers or the treasury luminaries or the credit agency raters or the boardroom directors who permitted this fiasco and were blind to its early signs— who will suffer most from the turmoil and set backs that lie ahead. So too will the idea that we can look to the icons at the top to do the right thing because their wealth and privilege bestow on them a higher level of accountability to do the right thing. That moral touchstone seems to have vanished, along with the primacy of the common stakeholder —something that has been a recurring theme at Finlay ON Governance.

These events have been the predictable consequence of what has amounted to decidedly subprime leadership and ethics in our boardrooms and in our institutions of government over the past number of years. They are a harbinger of the further crumbling of the pillars of public confidence and trust, which make them our choice for the Outrage of the Week.

The Autumn of Leaders Falling and the Rise of the Quiet Hero

An essay on icons of privilege and power in a skeptical world

Here and there, the turning leaves of autumn have begun to fall. A few leaders, or those who would have the world cling to such notions, have already preceded them. Alberto Gonzales has finally ended the torment of his pathetically inept performance as U.S. Attorney General, his tumble from a post he never should have held no doubt accelerated by the high-ranking members of the senate judiciary committee from both parties who publicly questioned his integrity. In addition to possessing unimpeachable credentials of honesty, it is always a good idea for holders of important public office to have —and be seen to have— an IQ above room temperature. It is hard to imagine an Attorney General in the 21st century who could make John Mitchell, Richard Nixon’s disgraced and eventually imprisoned AG, look better. But with his almost terminal state of amnesia about what was happening around him and his frequent reconstruction of key events which was later discredited by first-hand witnesses, Al Gonzales, the good friend of President George W. Bush, seems to have made that feat his defining accomplishment.

U.S. Senator Larry Craig (R-Idaho) fell from office on the floor of a men’s washroom of all places. But with his guilty plea to a misdemeanor charge, which he later recanted, followed by the announcement of his resignation last week and its sudden reversal a few days later, it would seem that Senator Craig has revealed an almost criminal level of indecision which itself should constitute grounds for his departure.

Former senator and recent TV star Fred Thompson’s entry into the Republican race for president would have fallen considerably short of the high expectations he generated —if it had ever gotten off the ground. A formal announcement on Jay Leno? Is this man really running for president or is he just planning to play one on TV? Many are already asking why this grumpy looking late entry thinks he could, or should, be elected president. His early appearances in Iowa and elsewhere suggest he hasn’t gotten around to figuring out the answer yet. Call in the Law and Order screenwriters.

The war in Iraq is increasingly viewed by Americans as the greatest foreign policy blunder in the country’s history. With the decline in support for the war, the popularity of its presidential chief architect swiftly follows. A majority of voting Americans believe the war has been a mistake and is not worth the cost. Only 26 percent approve of President Bush’s handling of the war, a figure that brings him perilously close to the low reached by President Lyndon Johnson during Vietnam.

In Toronto, movie stars have descended upon that city’s annual film festival in their private jets and block-long limousines. The carnival atmosphere of actors, groupies, paparazzi and high-powered parties has once again overtaken the town —or at least its better bars and hotels— that regularly appears in movies as New York, Boston or Chicago but rarely its actual self. It is an industry that is given to illusion, where it is difficult to distinguish between facts and myth and where hype often overshadows reality. Some stars are at the festival to promote their newest films. Others are there to promote their special cause and just coincidentally have a new movie to promote, too. Is it not remarkable how things work out with almost mathematically serendipitous precision for those with wealth, fame and cosmetically enhanced features?

Efforts to make the world better on the part of those endowed with privilege and opportunity are always to be commended. But sometimes, between the posing and the parties, the lavish displays of self-indulgence and the overreaching strides of the ever-glittering ego, the gravity and significance of the cause seem to get lost somewhere in the back of the limousine.

Why do so many leaders seem ultimately to be impostors in that role and ill-suited to its demands? Why do so many celebrities need to have their favorite causes accompanied by a traveling sideshow of parties, acolytes and five-star hotel suites? I suppose one should leave those answers to the psychologists. But even to the untrained eye there seems to be a narcissistic compulsion on the part of some members of the rich and powerful for constant attention and adulation. The applause and approval of the crowd become an irresistible addiction; the exercise of influence and power a thirst that can never be fully quenched. We are seeing the rise of what I call the virtue celebrity, where the pursuit of charitable endeavors and the recognition they bring has become one more weapon in the arsenal of personal and career marketing on the part of stars and billionaires. It is a world where success and public approbation has always required a good publicity agent. Now it requires a popular social cause as well.

Yet the more rich and powerful leaders and celebrities become, the more out of touch with reality they seem to drift. Britney Spears, Michael Jackson and Bill Clinton during his Monica days spring to mind. So does the procession of disgraced billionaire business figures and those more recently caught backdating stock options in order to grab a handful of extra dollars. More than a few have resorted to philanthropy and the pursuit of a socially laudable cause as a means of repairing a reputation damaged by their own misconduct or trying to impress regulators and prosecutors in the midst of investigations of wrongdoing. There is, it seems, never a shortage of announcements of gala dinners for yet another award ceremony or full-page advertisements extolling some stock option-rich benefactor whose endowment will be honored by his name appearing in large chiseled letters over the transom (the exterior of the Rotman business school building at the University of Toronto, for instance, displays the name of the donor financier in eight separate locations before you even reach the lobby). It becomes difficult even for the Panglossians among us not to occasionally wonder if such exercises are more about the feeding of oversized egos, and the creation of more places for the exalted to further exalt one another, than they are an authentically altruistic desire to make the world happier, healthier or wiser.

Some, of course, are genuine in their aspirations to make the world better. But a litmus test for sincerity is often humility —one of those rather underrated virtues that mothers try to teach but regrettably enjoys few adherents in the pantheon of the self-elevated.

Having worked with many of these kinds of people over the years, I have been struck by the fact that while they bask in the title and adulation that goes with being a public figure or celebrity connected to a special cause, often they fall measurably short when set against the lives, actions and sacrifice of more ordinary folks. The most impressive leaders I have known are those we generally never hear about. They are among the millions of individuals quietly performing acts of leadership and philanthropy who would never dream of making a side show out of it or posing for celebratory photos. They know their own limits and have a sense of perspective —two attributes which often elude the high-profile elite. They mentor the kids from broken homes, help out at the local hospital and travel to far-off parts of the world to fight hunger and disease. They seek no reward or title. They are always dipping into their own pockets to help out. You will not see their great feats of daily heroism on network TV, nor will you read about them besmirching the office they hold in the New York Times or elsewhere. They go about the important business of helping and inspiring others with a quiet dignity and strength of character that is often infectious. They are cut from the same powerfully modest mold as Lou Gehrig and Jackie Robinson —two of my personal heroes. They don’t need gala dinners, praising cover stories in major magazines or induction in, say, the Order of Canada whose membership still includes convicted felon Conrad Black and fugitive from U.S. justice Garth Drabinsky. And while many are incredibly generous in their charitable giving, they would not dream of having something named after them. Unlike the nouveau billionaire class, who seem to need the accompaniment of a brass band, klieg lights and a posse of publicity agents every time they make a donation, several millionaires I know write substantial checks each year and don’t even bother claiming the gifts for tax purposes.

The world will always need its larger than life figures —its Winston Churchills, its John F. Kennedys, its Pierre Elliott Trudeaus— to envision and inspire in new directions. They are few and far between, as their successors in office regularly confirm. It will always be captivated by its screen stars, though hopefully will not elevate them to the status of entire planetary systems rivaling the discoveries of Galileo. But from the boardroom betrayals of Enron and Hollinger and the epidemic of greed illustrated by out-of-control CEO pay to the quagmire of Iraq and the primacy of the privileged which has given rise to the greatest income gap since the 1920s, it is a world that is too often let down and disappointed by those whom it has entrusted and revered. We have discussed this phenomenon before in the context of the vanishing stakeholder. It is a reality that will increasingly see society turn to what I call its quiet heroes —the everyday leaders around us who are changing the world for the better in the voluntary organizations they run, the causes they support and the social needs they fill. Perhaps astonishingly to some, they are doing it without scandal, award ceremonies, private jets or gas-guzzling limousines.

If conventional leaders and cause-oriented celebrity icons are genuine in their aspirations and are looking for a model to work and live by that gets the job done well, they could do worse than follow the example set by their more unassuming counterparts.

The Trial of Conrad Black | Early Verdicts Part 2: Legacy Squandered

If Conrad Black is a great businessman, what and where is his legacy? Is it a thriving corporate empire, or is it just a Napoleonic ego exiled to some kind of legal Elba?

As Conrad Black awaits his fate at the hands of a federal court jury in Chicago, one can only hope that he and his colleagues will receive a just outcome. While I have a sense of what that outcome will be, I have declined to speculate about it for public consumption on these pages. It is a serious matter to have one’s freedom hanging in the balance, as Mr. Black and his co-defendants have. Neither the dignity nor the effectiveness of the process is assisted by pronouncements from armchair courtroom spectators.

There is a surprising interest, however, in the wider implications of what has been learned from the issues raised in the trial. I deal with the corporate governance aspects, and the failure of the guardians, watchdogs and gatekeepers, in Part 1 of this overview. As for Conrad Black himself, it is impossible to escape the public and media fascination with a man who has dominated the landscape for so many years and has done so with uncompromising zeal. Mr. Black’s trial has provided a convenient lens through which many have sought to gain a fuller picture of the person behind the headlines. He has encouraged the public curiosity by writing about the legal and human issues surrounding his case in his periodic columns in the National Post. (For nearly 20 years, my occasional Op-Ed columns were carried in the Financial Post. They never appeared again after Mr. Black took control of that newspaper.)

There will likely be little dispute that Conrad Black is one of the most interesting and intellectually gifted individuals ever to appear on the business scene. He was intriguing as a young fellow who lived in a Don Mills-area mansion, whom my chums and I would bicycle over to see from time to time in the 1950s, always feeling slightly dumber for the experience after we left. He remains fascinating half a century on. In a world where many CEOs are challenged to write coherently three successive sentences on their own, and seem to believe that the beginning of history coincided with their own birth, Mr. Black has written several sizeable historical volumes of scholarly acclaim. Most CEOs rarely have an original idea. Mr. Black has a whole closet full to which he adds on a regular basis the way Imelda Marcos added shoes. Most CEOs are rather one dimensional —or perhaps 2D, if you count their obsession with golf. Mr. Black is a multifaceted figure who has had the wisdom not to tempt that thief of time masquerading as 18 holes on nicely tended lawns.

But for all that I have admired about his larger than life presence, there is also larger than life disappointment. Mr. Black was afforded every opportunity at an early age, including the alacritous assistance of the all-connected and the impressively powerful. Yet, in the end, so much seems to have been squandered.

He was given every advantage —titles, position, money and the gift of a powerful intellect. He was awarded some of Canada’s highest tributes, including an almost unheard of elevation for a non-politician or government official to Canada’s privy council. That comes with the right to be called “the honorable,” which Mr. Black used to the hilt prior to his peerage reward, and a special passport which is claimed to smooth one’s way past snarly customs officials —or haughty head waiters.

Few had his connections or were set upon such a promising path paved by friends, relatives and mentors. He inherited a coveted place at the table of the Canadian establishment. Some might say he eventually took possession of the establishment. But if Conrad Black is a great businessman, what and where is his legacy? Is it a thriving corporate empire, or is it just a Napoleonic ego exiled to some kind of legal Elba?

The jewels of Argus —Massey Ferguson, Dominion Stores, Canadian Breweries, and even Orange Crush— have vanished. Mr. Black’s private holding company, Ravelston, the creation of E.P. Taylor, Eric Phillips and Wallace McCutcheon, is an admitted corporate criminal now controlled by a court-appointed receiver. He bought iconic newspapers like the Telegraph — he did not create them. They are gone from his empire. The one newspaper he takes credit for founding, the National Post, one might argue, has as much to do with the legendary Floyd Chalmers of Maclean Hunter as it does Conrad Black. Mr. Black bought the Financial Post long after it had been turned into a respected business institution by others and built the National Post on that foundation. It’s gone from his hands, too. Even the Hollinger name was the product of others. For many years it was a mining company controlled by Argus. Now it has shrunk to being little more than a check writing machine —for everyone except the shareholders. Lawyers and post-Black executives are making huge sums supposedly for reviving a debt-laden Hollinger. Even the company’s new CEO, someone by the name of Wesley Voorheis, is being paid nearly a million dollars a year from a company that is losing money while the stock languishes at an embarrassing 78 cents —and that’s on a good day.

That spinning sound you hear is the founders of Argus twirling in their graves over such ignominy. The ultimate symbolic indignity was the sale of the landmark Hollinger headquarters at 10 Toronto Street, long the seat of power for Mr. Black and his Argus forebears. Hollinger International also set about to create distance between Mr. Black and its principal asset, the Chicago Sun-Times. The company is now called Sun-Times Media Group, and they didn’t ask for Mr. Black’s permission.

Not all of these events can solely be attributed to Mr. Black’s failings. Some certainly can be. He has been at the helm of this empire for many years and there were, at the very least, doubtless turns in course he might have taken in order to avoid the legal and financial collision that has occurred. Sound judgment has not always been the most active part of Mr. Black’s character. Even his Canadian citizenship slipped through his overreaching hands as they preferred to clasp on to an honorific post offered by another land in a throwback to a by-gone era.

And, if it is shown that he is totally innocent of the charges against him, he has had to have set a Guinness record for bad luck. His personally selected directors have been the laughing stock of the boardroom world as a result of their courtroom performance at his trial. His long-time closest business colleague, David Radler, is an admitted felon for his criminal dealings at Hollinger. Even his private holding company, Ravelston, as noted above, pleaded guilty to a criminal count of mail fraud in U.S. federal court.

There were endless honors and awards for Conrad Black. But in a Black universe of boundless gifts, the potential of great and enduring accomplishment always seemed to be eclipsed —and defeated— by a larger sense of personal entitlement and a preoccupation that others were out to take advantage of him. He and his colleagues had to live in “a certain style,” as he called it, even while incurring the wrath of shareholders —however belatedly. Hollinger was his company, as he put it, an attitude which finally led to his ouster as its head. His obsession with having the noble title of another country caused him to give away his Canadian citizenship, which he now longs for and may wish he had before all is done. There were the Hollinger investors, whom he described as “ingrates.” A few years ago, it was all the shoplifters among the customers and employees of Dominion Stores who were nibbling away at his earnings. Servants (of whom he has many), he declared, were “a notoriously unreliable group, as any experienced employer of such people knows.” Then, of course, there were those pesky “corporate governance terrorists” of whom Mr. Black claims to be a “victim.” It is a self-image that recurs on a number of occasions in Mr. Black’s musings.

I believe Conrad Black has asserted he is a follower of the doctrine of Darwinian capitalism. Have you ever noticed that those who espouse a view of the survival of the fittest are generally those who have survived by starting out at the top? For one born to a mansion and who becomes the early protégé of one of Canada’s most prominent titans (Bud McDougald), who has every connecting door opened and every posh board seat reserved, it would take a special kind of talent to blow the establishment’s version of assisted living. Is this the Darwinian theory of which Conrad Black speaks?

This view of the world is not unique to persons of great wealth like Mr. Black. Charles Dickens wrote about them at some length, and the early 20th century produced a whole succession of such characters. It is nevertheless one of the more disappointing sides of those who hold themselves out to be champions of capitalism. It makes them smaller than they need to be in order to successfully fill that vital role.

Whoopi Goldberg once said Americans will forgive anyone for almost anything —except arrogance. The fact is that those who behave like sultans, whether from Brunei or The Bridle Path, are quick to attain the curiosity of the public but rarely, if ever, garner its respect and affection. Those might be attributes Mr. Black would wish to enjoy in the eyes of the 9 women and 3 men who now hold his fate. He may also hope that the jury will be more meticulous and attentive than his handpicked directors, as evidenced by the testimony of Hollinger’s breathtakingly inept audit committee members.

Whether he is acquitted or convicted, Mr. Black’s more historically enduring offense will be that he failed to live up to the extraordinary potential that fortune, family and providence showered upon him. He could have done so much more. He could have been an illuminating force in a time when people yearn for leaders who are smart, ethical and imaginative. That, in its best sense, is one of the important roles the aristocracy —a class with which he so clearly identifies— is supposed to serve. Instead, Mr. Black chose a path less bright. He seemed to thrive on attacking others with the sneering polysyllabic broadside that became his emblematic signature. There are occasions, of course, when healthy criticism is warranted, and we dispense our share at Finlay ON Governance. We are also on the receiving end of some. But one likes to think that powerful leaders can rise above the petty temptation to clobber others just because they are possessed of a superior vocabulary and have access to the public megaphone.

Mr. Black, it seems, has difficulty distinguishing the decidedly significant from the stupidly annoying. As a follower of some of the best military strategists in history, it is surprising that he never learned the first lesson of the successful general: to differentiate a trivial skirmish from a decisive battle. Greatness in a leader is measured as much by what he chooses not to do as by what he actually does. Restraint has always been a defining hallmark of power. It has been an irregular guest in Conrad Black’s life. He has mocked, chided and insulted virtually every party connected with his current legal woes, from the objecting shareholders and the SEC to the prosecutors at his criminal trial. And, even while they are deliberating on his freedom, he has been unable to resist imparting a sarcastic jab at the jury about their request for an exhibit related to non-compete payments.

Mr. Black’s career, as it relates to the handling of other people’s money in a publicly traded corporation, is, for all practical purposes, at an end. Who would entrust funds to someone who has articulated such a contemptuous view of the role of shareholders and acted in such a high-handed fashion when it comes to leading a board of directors? His actions have also poorly served the institution of capitalism of which he has spoken with glowing admiration. It will, of course, survive Conrad Black. But will it survive the era of excess which he has come to symbolize? It is a time which also coincides with the greatest concentration of wealth at the top in America since 1929. The danger is that the cumulative effect of these forces of greed and acquisitiveness, of which his trial has made Mr. Black such a well-documented example, may spark a backlash similar to the political intervention that reshaped the corporate and economic landscape of the 1930s.

One of the more amusing anomalies that seems to afflict so many of these self- proclaimed champions of capitalism is that their deeds often prompt conditions that stifle and undermine the freedoms of the very system they espouse. The public’s ire over perceived abuses at the hands of the privileged can ignite a firestorm of political action determined to redress the misconduct. Sometimes, it overreaches the target. Still, one rarely finds the objects of the concern willing to moderate their behavior. I suspect this is because they are less the genuine advocates of capitalism they claim to be than they are apostles of personal greed and self-interest —regardless of the consequences. They are content to have others pick up the litter they leave behind.

Mr. Black’s own words and actions create an unavoidable impression of the man. His Louis the XIV style pronouncements (“But I’m not prepared to re-enact the French revolutionary renunciation of the rights of the nobility”), his Nixonesque email moment (“Nor will we accept directors that we do not have confidence will be loyalists, by which I mean conscientious, responsible, thorough, but well-disposed, like the incumbents, though obviously, I didn’t say that”), his stinging contempt for investors and his inability to tolerate criticism — all lead to the inevitable judgment that he is one more tycoon in the grandiose march of the garishly puffed up into the New Gilded Age, one more self-absorbed boardroom titan who had no time for corporate governance and then spent all his time dealing with the casualties of that miscalculation, one more celebrity for whom the public eventually tires of their tedious displays of self-indulgence and overweening ego. However his legal travails turn out, the inevitable conclusion is that, in many ways, the Conrad Black saga is another chapter in the widening sense of betrayal people feel about those whom they have admired, and even trusted, but who ultimately leave them feeling terribly let down.

Whether his fate is that of a free man or one faced with forced confinement, Mr. Black will soon begin to recede from the sphere of influence he craved and the media was happy to facilitate. One does not have one’s boardroom antics and backroom designs (“Dear Donald: Could I ask a rather esoteric favor?”) opened up to the rest of the world without consequence. Exile from the high councils of business and public life would seem a distinct possibility, as is the prospect of legal action of a different nature on the part of the Securities and Exchange Commission and the Ontario Securities Commission, regardless of the outcome of the criminal trial.

Napoleon, it is said, reflected from afar on some of the forces that brought an unexpected end to his career. He attributed his fate not to the strength of opposing armies but to something within his own character. “As soon as I made my debut,” the dethroned emperor is said to have confided to Las Cases, “I found myself rich with power, and circumstances and my strengths were such that, as soon as I was given command, I no longer knew either masters or laws.”

The curse of hubris and a misguided sense of personal invincibility has seen the downfall of more than a few emperors, presidents and, perhaps, an occasional press baron. Having arrived at this doubtlessly unanticipated point in his life, one wonders what, if any, insights into his own character Conrad Black is capable of assessing —or whether he will be content to leave that to other historians.