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.

RIM Finally Runs Out of Shiny Objects

RIM Finally Runs Out of Shiny Objects

What a contrast is the deathwatch that now grips many RIM analysts.  Years ago, they were bedazzled cheerleaders.  We had some thoughts on the folly of that short sighted thinking at the time. Today, they seem more like jilted  fanboys in the face of the company’s announcement of record losses, shrinking sales and shipments and other setbacks in its new product launch.   

What is happening at RIM is sad for the company, its employees and investors.  What is sadder, still, is that, just like what happened at three other now vanished Canadian icons — Nortel, Livent and Hollinger — it was avoidable, and almost entirely the product of management arrogance that was unstopped because of bad corporate governance. 

We wrote about these same issues in these same companies long before anyone else because they foreshadowed the crisis that history predicted was coming.  In RIM’s case, it was a lesson that even major shareholders who claim a strong commitment to good corporate governance, like the Ontario Teacher’s Pension Plan, were too blinded by the prospects of giddy returns to see.  So they and others gave a pass to the weak board structure and the mesmerized cast of directors who bought into a loopy management style.

These are not popular positions to take, as we often discover.  When we raised issues about RIM’s boardroom culture and ethically challenged top management — and we were the first on record to do so — a barrage of nasty, vindictive and occasionally threatening emails and telephone calls followed.  RIM, it seemed, could do no wrong even when it did (remember the stock option backdating fiasco?), and absolutely no one was interested in hearing a critical word because of the company’s success at the time.   “Who needs a board when you have Jim and Mike?” seemed to be how most saw it.  No one considered for a moment that RIM’s success might be fleeting, least of all entranced directors on its board.  But being a director, investor or analyst is about more than being a captive of a shiny object, whether it is a glittering gold watch or a spellbinding (co-) CEO.

Next on the agenda will be a succession of directors who start to bail out, not wanting their reputations to be tarnished when the Chapter 11 filing is made and not admitting that they, too, took too long to use their mentality to wake up to reality, as Frank liked to urge on Cole Porter’s behalf.

Early clues to RIM’s fast approaching demise, which is clearly underway as the stock hurtles toward the five-dollar mark, were there for all to see, as they were, and are, for many other companies.  They always begin with how the boardroom culture dictates the exercise of power and accountability or whether it plays any meaningful role in that process at all.  But that is a view that too many inside and outside the boardroom, often  caught in a hypnotic state of denial on the one hand and over-deference to the beguiling CEO on the other, remain unwilling to see.  A change in fortune can always happen to the beneficiaries of great success and especially to those who make the mistake of assuming previous success is a guarantee for future wins, as JPMorgan’s board is in the process of discovering today in its widening scandal of losses, and as GM’s, Nortel’s, Lehman’s and Penn Central Railroad’s directors before them learned the hard way.  It seldom announces its impending arrival in a corporate wide email.

For those interested in learning more about the missed boardroom clues that brought RIM to the brink, our full series of 25 posts over the past six years can be found here

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Happy Birthday, Canada.  Having survived the theatrics of Conrad Black’s renunciation, the vanishing of the Canadians icons he once headed like Hollinger, Dominion Stores, Massey Ferguson and Argus, and now his coming back to your forgiving embrace after being a guest of the U.S. penal system, you can survive anything.  More significant, however, and worthy of recognition and praise on such a day, is the sacrifice and courage shown by the men and women of Canada’s armed forces who serve to protect freedom and democracy here and in far off lands, along with their families who give so much.  A different kind of war is fought daily at home as well by those who battle poverty, injustice and the tyranny that is often inflicted by power on the part of governments, corporations and the media when that becomes untethered from moral values and human decency.  They seldom receive plaques or medals, unlike Mr. Black who continues to hold his Canadian distinctions despite disgracing them (it was on Canadian soil in Toronto that Mr. Black engaged in his obstruction of justice for which he was convicted in the U.S.). These foot soldiers of a civilized society represent in their often unremunerated and unsung work the best of what Canada stands for in the world.

Quoted on efforts to kill the Volcker Rule

And other overdue thoughts on Conrad Black’s return to Canada, Obama’s fall, RIM’s folly, Canadian healthcare death panels and the changeless universe of Wall Street

The Centre for Corporate & Public Governance was interviewed last week about the frequent behind-the-scenes efforts of the privately financed Washington-based Committee on Capital Market Regulation to turn back regulatory reforms the group thinks get in its way. The piece is by Emmy Award-winning writer Justin Rohrlich and presents a timely and detailed analysis of a too-overlooked aspect of American business.  It can be read here.

Once again, Wall Street’s memory makes an amnesiac’s recall look positively eidetic.  We had a few thoughts on the CCMR’s earlier efforts to weaken Sarbanes-Oxley legislation just months before the near collapse of the banking system.  Nobody in this group had the slightest concern at the time about excessive leverage, off-the-book transactions, credit default swaps that potentially ran into the trillions, or excessive boardroom pay scams that encouraged too many CEOs to take on too much risk.  Many boards had no idea what was happening around them.  Jimmy Cayne of Bear Stearns and Dick Fuld of Lehman Brothers were thought of as Wall Street heroes.  Citigroup and AIG were proud supporters of the group’s efforts, then and now.

To our dismay at the time, then-treasury secretary Henry M. Paulson Jr. was known to support the early efforts of the CCMR to roll back the regulatory clock.  A few months later, he was bailing out the very companies that had been squawking about too much government in their boardrooms.

That alone should have been enough to discredit the CCMR and anything it has to say now about the so-called excesses of Dodd-Frank and the Volcker Rule.  As we said in the article this week: “The idea that the CCMR has anything credible to say about what is necessary to protect capitalism has got to be one of the greatest scams ever foisted on the American public.”  

But in a world where memories are considered non-performing assets and rarely accorded any importance at all, the CCMR and its likes appear to have no difficulty in raising money in order to blunt the regulatory reforms of the government that saved capitalism from itself.  The spirit of E. Merrick Dodd Jr., who made a similar observation after the economic collapse that followed the Great Depression, would not be surprised.

 * * *

We have been less than regular in our comments and reporting of events that shape the accountability of leaders, the responsibilities of capitalism and the madness that continues to infect the boardroom on the subject of CEO compensation.  Life- changing events have a tendency to rudely interrupt even the most important of debates, and I must confess there have been a few in my family to deal with over the past 18 months. We may fool ourselves that we sit in the saddle able to command our direction and destination, but it is the horses of fate that are often in control of where we wind up, as any family suddenly faced with a medical trauma surely knows.  Such events tend to concentrate the mind on the preciousness of life.  Unfortunately, that appreciation is not as universally held in the health care system as one might think.  For while they were a concoction of anti-Obama forces during the great health care reform debate in the United States a few years ago, the shocking reality is that in Canada’s often praised but entirely unaccountable medical system, the specter of death panels, and a bias against what are seen as too costly efforts to prolong the life of the elderly, even for those with a chance of recovering, has now arrived. Extricating an elderly parent from the jaws of certain hospital death, whether from neglect or a predisposition by medical professionals to end that life, can be just as traumatic and debilitating to a family as the injury that put them there.

Further thoughts on this third rail of the Canadian health care system will ensue.

 * * *

For all the pain felt mostly on Main Street and in the dire state of the U.S. deficit, but apparently long since forgotten on Wall Street, the aftermath of the worst economic calamity since the Great Depression has changed very little in American business.  Wall Street and big bankers have conveniently forgotten about the missteps that brought the financial system to the brink of collapse.  Boards continue to be out of touch with what is happening around them and still show up with the water hose long after the fire has erupted, as recent events at companies like Chesapeake Energy, CP, and Yahoo confirm.  Citigroup remains an under-five-dollar-stock, when you strip away its reverse one-for-ten split.  Bank of America seems headed in that direction, too. Lobbyists still make millions in their insidious attempts to skirt reforms and undercut measures to save the middle class.  CEO pay soars without any connection to performance or to the independent thinking of fully engaged directors.  And in the White House, the greatest hope for change in the way Washington works since FDR has permitted a sequence of blunders and mishandled events (support for an extension of the Bush-era tax cuts while failing to champion Simpson-Bowles, to cite just two) to tarnish that promise to the point where the presidential podium seems destined once again to become an institution of, by and for the billionaire class.  Barack Obama’s uncertain future in the face of a querulous electorate is all the more bewildering given that Republican contenders for their party’s presidential nomination have unleashed the most divisive assault against good judgment and common sense since the short- lived Know-Nothing party of the mid-19th century.  Not even the most recent Republican circus-like spectacle was sufficient to give the White House an edge, so bad has been its handling of major issues and how it has allowed them to be misperceived in a regressive sea of billionaire-supported super PACs.

Elsewhere, investors, along with once starry-eyed analysts who were too long prepared to give a pass to the governance failures and shortcomings of Canadian- headquartered Research In Motion, have at last been jolted by the carnage we predicted.   Company co-founder and long-time co-CEO and co-board chair (the titles alone reflected the dysfunctionality of the boardroom) Jim Balsillie, is gone.   The devastation wrought by years of board neglect will take much longer to fade away, if it ever does.  There is hope, however, in what Bill Ackman managed to pull off in awakening investors at CP and prompting them to replace a dozy, imperious board with a strategy that might add value, which is precisely what most boards should do but don’t.  There is little to take hope from in the Facebook IPO fiasco or the ceremonial (and that’s all it is) board that Mark Zuckerberg put together.

Also in Canada, the dark prince of the Canadian establishment, Conrad M. Black, has returned.  His reentry to the country whose citizenship he renounced to accept a British peerage (evocative of Sir Thomas More’s plaintive inquiry to a chief witness in his prosecution, “but for Wales?”, in Robert Bolt’s A Man for All Seasons), only hours after his release from the U.S. penal system, stunned many observers and immigration lawyers who claimed that such a deal would not be available to anyone else.  I do not begrudge Mr. Black’s return to Don Mills, a childhood haunt we both shared.  What I do take issue with is the special treatment hatched behind closed doors that has all the earmarks of Canada’s elite, including at least two former prime ministers and a string of A-list partygoers, going to bat for Mr. Black by influencing the Harper government to pull strings that are invisible, and most definitely unreachable, to anyone else. 

But then special treatment and a lifetime of doors opened expressly for him have been the recurring landmarks of Mr. Black’s public and business life.  He still holds the various national honors bestowed upon him which were revoked for other (actual) Canadian citizens when they fell into the criminal abyss.  Special parking spaces in the often busy nearby York Mills Shopping Centre surely cannot be far behind for his lordship.  In fact, Canadian novelist Margaret Atwood, one of Mr. Black’s newly recruited fans, might put her own talents to good use by inveigling, through poetry or other literate means, the City of Toronto to establish a special lordship-only lane that would permit Mr. Black to motor briskly without undue delay along Bayview Avenue for those quick shopping errands he missed doing for the past few years.  Once the special express train of privileges and exemptions gets rolling in Canada, where half of the legislative branch of the federal government is still appointed by the imperial wave of a prime ministerial hand with not a whit of public input, there is no stopping it.

Still, my 90-year-old mother, who always had a corner on the family’s supply of sympathy for Mr. Black (fortunately for him she did not see Mr. Black’s recent performance with the CBC’s Peter Mansbridge), and whose survival from an incredible array of medical blunders and the arrogance of an astonishing assemblage of unaccountable actors in the Canadian health care system could only have been produced by Divine intervention, is heartened to know that Mr. Black will finally get to enjoy his August by a Don Mills ravine.  At this point, that’s good enough for me.  Like the Canadian author Barbara Gowdy who made it famous, and Mr. Black, I, too, participated in its wonders and delights for many years with friends sadly lost to the mists of the retreating years and still not recoverable by the famous Facebook time machine. 

Mr. Black has paid his formal debt to U.S. society.  Civil servants often easily manipulated at the behest of their political masters, along with the rich and powerful, may have skirted the rules to allow a preferred outcome in Mr. Black’s case.  And further explanations and inquiries are surely appropriate in a land where the rule of law, and not the power of individuals, is supposed to be the defining principle of its civil society.  But at least for this summer, Mr. Black should have his chance to gaze upon the woods from his baronial mansion and to ponder the freedom of the foxes at dusk and how their survival still depends, as it forever has, upon the cunning of their instincts and the swiftness of their mind.

* * *

Our rambling journey from the White House and Wall Street to Don Mills and Canadian health care death panels barely scratches the surface of thoughts unvoiced on these pages over the past many months.  No mention has been made of Irish Setters (a rescue joined our family not long ago); the Titanic; Davos and the G8 (two modern day hubris-afflicted and overrated Titanics of another kind), the Great Pyramids of Giza, which can never be overrated; Jazz and the unique vocal stylings of Stacey Kent; Oliver Jones, who somehow manages to put more piano notes in a song than even another favorite, Oscar Peterson; the magical clarinet tones of the great Artie Shaw; Muskoka sunsets; the 1960 World Series;  Clare Island salmon; the Susan Hampshire rose; and any movie written by Robert Bolt and directed by David Lean. 


These and other favorite topics will have to await another day.

Quoted in Maclean’s Magazine on RIM

Recent changes only confirm that the  company  remains in denial

We are quoted in this week’s cover story of Maclean’s on the RIM fiasco. Regular readers will know that Finlay ON Governance has been on this story for several years and has long predicted the kind of stock meltdown and leadership turmoil that has rocked the company.  The co-founders’ decision to step aside from the co-CEO slot, but not out of the boardroom, and the appointment of an insider to CEO with an old-guard director moving up as chair of the board, do not change our views.

The Maclean’s piece presents a good overview of some of the failures but is a little short on the root cause, which we have long contended is RIM’s dysfunctional system of corporate governance.  Here are some further thoughts on that subject and why the recent management changes are unlikely to produce the results investors would like.

The fact that RIM’s top management and board could take so long to come up with so little just shows how far out of touch they remain.  It’s obvious that Balsillie and Lazaridis wanted their guy in the top spot and do not grasp why shareholders were looking for more than a marionette whose strings they can pull any time.

What is really alarming is that independent directors think this will work, when a clean break with a strong new CEO at the helm, plus a fresh outsider as board chair  — unaccompanied by RIM’s bulging baggage of failures — should have been brought in.  Of course, any new CEO worthy of the title would have insisted that Balsillie and Lazaridis depart the board, as was the case at Yahoo recently.  It will take a few more tries, and several new shocks, before the company actually gets it right  — if it ever does.

Separation complexes are unfortunate in dogs.  They are a disaster in company founders who can no longer read the market or the wishes of their investors.  The new insider CEO is not the solution.  Nor is the appointment of Barbara Stymiest as the so-called “independent” board chair.  We were among the first — and long before it became fashionable — to openly call for this kind of change.  But putting a long-time enabler of RIM’s governance problems in charge of the board is a little like promoting a sleeping sentry to captain of the guards.

RIM’s boardroom is located in Waterloo, Ontario, but as far as investors are concerned, these changes only confirm that it remains firmly footed in denial.

RIM Needs a New OS — for its Boardroom

The game has changed.  RIM’s management has not.  Neither has its board.

Today’s latest (20 percent) plunge in the stock of Canadian based Research In Motion, this time because the company missed about every expected metric for the quarter, re-confirms that RIM needs a new operating system for its boardroom.  It is the board, with a its succession of lame directors, that has permitted a culture of smugness, distraction and disconnection to cloud the judgment and performance of top management, and has too long tolerated a disingenuous streak in the way the co-founders deal with adversity.  This is what has led to RIM’s fall from glory and the devastation of its stock.  Management was playing its own game and setting its own rules.  It thought success would continue indefinitely and the market would defer endlessly to its much-trumpeted wisdom.

The game has changed.  RIM’s management has not.  BlackBerrys are out.  Apples are in.  The kids decide what’s hip and everybody wants to be cool.  Holding up a new Playbook is the definition of uncool.  Launching it in the summer is the definition of stupidity.   Only grandiose egos, too used to everyone genuflecting to their brilliance, could come up with this foolishness.

Long before it became popular, in the wake of the billions of dollars in company value that have been obliterated, we lamented the weaknesses of RIM’s governance practices .  We predicted further casualties from a board mentality where management is effectively accountable to itself and still allows a regime involving co-this and co-that at the top that would not be tolerated in any mature, self-respecting company, let alone one that is experiencing something of a freefall in its shares. The stock is down more than 60 percent this year.  No significant change in management, or the board for that matter, has been forthcoming.

RIM’s problems will not end until the board steps up, key management actors are forced to step down and a new culture of accountability is rebooted in RIM’s boardroom.

Research In Motion’s Plunge a Failure of Corporate Governance

The crashing fall of Research In Motion’s stock from its euphoric highs where management could do no wrong (even when it did) to the current depths of shareholder odium has one explanation — and only one explanation.  It is a failure of corporate governance, pure and simple.  What brought RIM to this point was adumbrated on these pages some time ago.  A few changes in boardroom players followed our reports, but a change in culture did not.  The current crisis confirms that the board remains overly deferential to its co-founders.  This, along with the fact that directors continue to permit them to head the board as co-chairs, as well as head the management team as co-CEOs, is exhibit one in the case for RIM’s governance shortcomings.  Any board that would have allowed the two men who were at the center of RIM’s options backdating scandal and who displayed such sophomoric excuses as to their knowledge of corporate governance practices and basic accounting rules (Mr. Balsillie retains a professional accounting designation) is not a board that entirely understands its role in protecting shareholder interests.  We were the first to call for the appointment of a non-executive chair at RIM some years ago and for the dismantling of the peculiar positions of board co-chairman and management co-CEO.  Those reforms are needed now more than ever, yet the board seems both deaf and blind to their urgency.

As RIM’s shareholders have watched billions wiped out in stock value over the past several weeks, little has been heard from the board or its lead director, John E. Richardson, however.  Nor has there been any indication that directors are foregoing their fees during a time when investors are losing so much.  Each director is paid a minimum of $150,000 annually.  That’s a reasonable fee for directors who are adding value; it is far too much for bystanders to a company’s calamity.  Exactly one year ago , RIM’s stock on the NASDAQ Exchange closed at $58.84.  As of this posting, the stock has fallen to $26.74.  Investors are bailing in droves.

It is time for a shakeup at RIM.  It starts with a board that ceases to be mesmerized by management actors who have too long dominated the corporate governance stage and brings in serious accountability reforms that raise investor confidence and restore corporate performance.

Has the SEC Caught the OSC’s Disease?

The world’s most powerful securities regulator has long called itself the investor’s advocate. Given its stunning failure over the Madoff scam and the latest scandal, involving R. Allen Stanford, it may be on its way to becoming known as the investor’s nightmare.

For years, the Securities and Exchange Commission was regarded as one of the toughest securities cops in the world. The Ontario Securities Commission, North America’s second largest capital markets regulator, on the other hand, has been viewed more like the Keystone Kops –missing the red flags in the Bre-X fraud, dropping the ball on Livent, dodging the tough calls with Hollinger, and losing a number of high profile cases before the courts. In many quarters, the OSC has been dismissed as something of a joke inside Canada and an embarrassment outside.

But recently, it is the SEC that has taken quite a hit. (more…)