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.

One CEO to Go, Please.

When he became BP’s CEO in 2007, Tony Hayward was quoted as saying that he would focus on safety matters like a laser.  But his mind-blowing evasiveness and complete failure to show what he did in that regard before a frustrated Congressional Committee proved he could not muster the intensity of a bathroom nightlight.

America, and a good part of the world, have seen a number of unimpressive Congressional performances on the part of business leaders in recent months and years.  Appearances by the heads of Citigroup, Goldman Sachs, Countrywide Financial and the major Detroit automakers leap to mind.  But nothing can compare with the spectacle of BP CEO Tony Hayward, who testified — and the term can only be used in the loosest sense — before a subcommittee of the House Energy and Commerce Committee on Thursday.  It is hard to imagine a more profuse display of insincerity, evasion and stonewalling on the part of the man who leads the company which saw the deaths of 11 workers on its Deepwater Horizon oil rig and caused the worst environmental disaster in U.S. history.  Far from taking responsibility for what occurred on his watch, he pointed his finger at everyone lower down in the organization.  Apparently, not even the company’s alarming emails indicating problems with the rig prompted any further investigation on Mr. Hayward’s part.  His knowledge of the spill and the causes leading to it seemed no better than the what could be expected from the average housewife in Minneapolis who has never been on an oil rig, much less been paid $6 million in compensation for heading a global oil company.  It was, in short, a performance that would have made Bruce Ismay, the infamous head of the White Star Line who owned the Titanic and managed to find his way into a lifeboat as the great ship was sinking, blush with embarrassment.

When he became CEO in 2007, Mr. Hayward was quoted as saying that he would focus on safety matters like a laser.  But his mind-blowing evasiveness and complete failure to show what he did in that regard proved he could not muster the intensity of a bathroom nightlight.

A few days ago we suggested that the repeated failures of the company to arrest the spill and recap the well should prompt President Barack Obama to fire BP and put a new crew in charge.  Since that time, the amount of oil still spewing from the well has increased dramatically.  The spill has taken an even greater toll in terms of nature, shorelines and jobs.  From a business perspective, no CEO has ever presided over a more horrendous loss of share value or such a steep decline in both investor and public esteem.

What is abundantly clear from today’s exhibition is that it is time for BP’s board to fire Mr. Hayward.  He simply does not comprehend how a leader is expected to act in a time of crisis.  To not do so immediately would be for BP to inflict yet more insult and calamity upon an investing public that has been shamefully beleaguered by management’s negligence and a shocked American public that is forced to witness this slow motion horror worsen with each day.

Goldman’s Exhibits of Wall Street Insincerity

Collectively, in their pivotal appearance before Congress, Goldman’s top performers could not muster the sincerity, transparency or gravitas of a used car salesman.  It is unlikely to play well on Main Street.

Nothing illustrates the folly and arrogance of Wall Street more than the appearance of the Goldman Sachs executives who testified yesterday before the Senate Permanent Subcommittee on Investigations.  Rarely has such a group of men (of Goldman’s seven past and current employees who appeared as witnesses, all were men) so graphically confirmed Main Street’s jaded image of Wall Street.  Collectively, the best Goldman had to offer in their fields could not muster the sincerity, transparency or gravitas of a used car salesman.  Their failure to give clear answers even extended to a refusal to acknowledge the duty to act in the best interests of clients.  To many watching the performance, the only conclusion is that they are so used to acting in their own interests that they are unable to understand a larger sense of duty.  This is often what happens when great wealth arrives to youth before maturity and wisdom have made an entrance.

Whatever skills these people were paid their millions for, memory did not seem to be among them, with so many constantly claiming they did not know or could not remember key facts and events. Goldman’s CEO Lloyd Blankfein offered little more in his grasp of details.  One might have expected that someone who was paid well in excess of $100 million over the past five years and heads what is widely regarded as the world’s preeminent investment banker would be able to manage the tasks of stringing words together in complete sentences and in persuasive thoughts.  As the English language is not yet something Wall Street has learned to monetize or short, those skills do not appear to matter there.  They do to Main Street.

If, having played a central role in the worst financial meltdown since the Great Depression and needing the injection of hundreds of billions in public funds to keep it solvent, Wall Street — and especially its most illustrious icons — cannot manage to explain what they do and why in a coherent fashion to the satisfaction of Main Street, if they cannot project a sense of ethics and purpose that goes beyond self- interest, if their values appear disconnected from reality and the value they add to society seems only synthetic and contrived, the need for fundamental reform in both the culture of these institutions and the laws that regulate them is more urgent and far-reaching than anyone has yet imagined.

It’s Morning in a Healthier America

The day health care reform and universal coverage moved from a noble dream to the law of the land.

Every few decades, America takes a momentous turn in reaffirming what it stands for and how it treats its citizens.  This happened with the enactment of Social Security in the 1930s and with Medicare and the civil rights legislation of the 1960s.  At 11:57 am EDT today, history will record that another milestone was reached with the signing into law of the Affordable Health Care for America Act by President Barack Obama.

As they rallied to support those landmark moments in the past, each generation of leaders and legislators faced doubts and objections.  But they overcame them because they believed they were engaged in an historic act of faith that would make the world better for their children and grandchildren.  Those who stood in their places over the past months in the White House and in the Democratic aisles of Congress were driven by a similar sense of mission and faith.  This was their contribution to creating a more perfect union, where the first word in that magisterial phrase from the Declaration of Independence, “life, liberty and the pursuit of happiness,” now takes on new hope for millions.   For many legislators, this law will be the hallmark of their careers; everything else will be epilogue.  It is this day they will long remember and frequently recount to their children and grandchildren, as King Harry’s bruised but happy band did on each St. Crispin’s day.

Making health care affordable and accessible for all Americans is likely the most costly enterprise ever embarked upon in the nation’s history — except for the costliness of doing nothing.  It would likely have needed Democratic control of both Houses of Congress, and the White House, for such a plan to have become law, as with previous groundbreaking social legislation under FDR and Lyndon Johnson.  That alignment of political planets does not happen often in America and it may not again for some time, given an increasingly acerbic public mood.  Mr. Obama and his party’s leadership in Congress rightly seized upon a perhaps short-lived window of opportunity, which may in some ways account for an occasionally clumsy process and content in the bill that was not exactly exemplary.  But these imperfections, and those that may arise in the future, should not detract meaningfully from the importance of what has eluded so many presidents and politicians of both parties over a century of efforts.  Nor should it dampen the joy of the moment when health care reform and universal coverage moved from a noble dream to the law of the land.

Lawmakers of this era, including President Obama, may accomplish many things in the years to come.  But few will compare with that symbolized by this day, when, like the giants who preceded them, they ventured upon the bolder path in America’s ever upward moving journey, and gave to the future the promise of a brighter tomorrow.

Bonfire of the Insanities: An Essay on AIG and Wall Street’s Culture of Entitlement

AIG’s bonuses have become more than just a tipping point for a long simmering resentment over executive compensation.  They have become an entire gravitational force field of umbrage at the greed, arrogance and now horrifically costly stupidity on the part of these Wall Street masters of the universe, as they preferred to be called in times of a calmer CBOE volatility index.

(Wall Street tycoon)

We are shocked, shocked, to find government trying to interfere with free market capitalism.

(Government official)

Here is your share of the TARP bailout, sir. 

(Wall Street tycoon)

Thank you very much.

Recent events make it easy to imagine such a remake of Captain Renault’s iconic lines from the classic film, Casablanca.  But even the highly creative Epstein brothers, who wrote the original screenplay, would have trouble accepting that the hypocrisy uttered on Wall Street today would make for credible dialogue.   Believe it. (more…)

The Lehman CEO as Superman, and Other Myths in an Era of Underwhelming and Overpaid Leaders

When the market is going up, much of the world treats CEOs like superheroes who are worth every penny of the extraordinary sums they command. But when fate and fortune retreat and reverse direction, these CEOs suddenly claim only to be human, an attribute with which they had previously never shown much familiarity.

It was, in many ways, a script that has become all too familiar in recent months. The well-dressed CEO appears before a committee of the U.S. Congress, says he takes full responsibility for the collapse of the company he headed, and then goes on to blame short-sellers, the housing market and a run on the bank. He says there was no need for more capital, but now, as a result of that decision, there is no company either. And yes, he, too, was worth the fortune he was paid. The problem was that, although its CEO received close to half a billion dollars since 2000, the company that prevailed for 158 years through a civil war, financial panics, economic depressions and two world wars could not survive the leadership of Richard S. Fuld Jr. So Lehman Brothers is no more.

There is a way that the spotlight of Congressional investigations and live television reveal dimensions to CEOs like nothing else can. Yesterday, it was Mr. Fuld’s turn before the U.S. House Committee on Oversight and Government Reform. A familiar pattern emerged from the hearing.

When the market is going up, much of the world treats CEOs like superheroes who are worth every penny of the extraordinary sums they command. A company’s success is seen pretty much as a one-man show. This was especially true for Lehman’s Mr. Fuld, who apparently was so crucial to the bank that they needed to replicate him as chairman of the board of directors, CEO of the company and chairman of its executive committee all at the same time. No private jet is too luxurious, no pay package is too extravagant, no amount of directorial slumber too deep that otherwise might challenge the modern boardroom Caesar. As noted on these pages last month, the CEOs of Merrill Lynch, Citigroup, AIG, Bear Stearns and Lehman Brothers’ Richard Fuld received an aggregate compensation in excess of one billion dollars over the past five years.

But when fate and fortune retreat and reverse direction, these CEOs suddenly turn humble and claim only to be human, an attribute with which they had previously never shown much familiarity. They speak plaintively about the vicissitudes of life, look for empathy and understanding –and a lot of scapegoats.So much of the world they once ruled is, they admit, really beyond their control. As Mr. Fuld testified before the Committee:

In the end, despite all our efforts, we were overwhelmed… A litany of destabilizing factors: rumors, widening credit default swap spreads, naked short attacks, credit agency downgrades, a loss of confidence by clients and counterparties, and strategic buyers sitting on the sidelines waiting for an assisted deal were not only part of Lehman’s story, but an all too familiar tale for many financial institutions.

It’s a far cry from the tone struck before by executives like Mr. Fuld. In the good times, success pretty much has only one father and that’s the CEO, according to many board compensation committee reports. Failure’s paternity has many culprits, including always short-sellers and the occasional abrupt change in the weather.

We’ve heard this song before.  Conrad Black when he headed Hollinger; Enron’s Jeffrey Skilling; James Cayne, who ran the board and management of Bear Stearns for many years; and Angelo Mozilo, the subprime czar of mortgage giant Countrywide Financial all cut a swath of media adulation and investor diffidence during their reigns. But the perverse gods of markets and boardrooms insist on having their laughs. The CEOs whom they raise up to such rarified heights that they actually begin to think they are god-like themselves soon have a harsh reconnection with human frailty and imperfection when they fall back to earth with a hard thud. For some, like Conrad Black and Jeff Skilling, that sudden descent to a decidedly undeferential world comes in the form of prison time for corporate crime. For others, like Cayne, Mozilo and Fuld, a different kind of prison locks them into a sentence of personal failure and public disgrace from which there is seldom any escape, no matter how impressive their mansions and luxury condos.

If you did not know that Mr. Fuld had run one of the largest and oldest investment banking institutions in the world and that he was compensated in sums that defy human comprehension, there would be nothing in his performance yesterday to suggest that he had ever occupied such lofty office. His speech was halting, his manner often disingenuous, his memory selective, his words unevocative, his judgment unimpressive. There was no  hint of insight or foresight that was any greater than that of a million middle managers, let alone a five hundred million-dollar man. Mr. Fuld, who claimed the company was in good shape one week apparently could not see even into the next, showing his vision lacked something of the reputed prescience of the Davos clan. (Mr. Fuld is a long-time attendee at the World Economic Forum, another puffed-up institution of over-hyped CEOs and hangers-on that has become an annual fashion show for the emperor without clothes.)

One more thing that might give reason to pause and reflect about the man who presided over the largest collapse of any corporation in American history: Until a few weeks ago, Mr. Fuld was a director of the Federal Reserve Bank of New York. He was elected by other member banks –and hold onto your hats for this one– to represent the general public.

The besieged state of the world’s economy seems to be in the process of separating models of genuine leadership, which emphasize value and character, from their long-reigning impostors.  It has taken the worst threat since the Great Depression for Wall Street and Main Street to comprehend the depth of the scam that has been occurring under their beguiled eyes over the past number of years. Assurance of value was taken for granted; the skill and accomplishment (and need) of grandly compensated egos was not even to be questioned. Their word was gold, so we were told.  What we have discovered in recent months after trillions in losses and government interventions, however, is, to paraphrase Gertrude Stein, there was no there, there.

Perhaps when this unseemly procession of failed and discredited CEOs, whose arrogance, greed and misjudgments have brought Depression era fears to Main Street and necessitated the largest private sector bailout in history, is over and the extent to which the world was taken in by the myth of their excessively compensated abilities becomes inviolably clear, we can return to a time of real leaders whose attributes include some of the most paramount and uncommon abilities of all:good judgment, common sense and two feet planted squarely on the ground.

The Day Wall Street and Main Street Collided

The public rarely likes to be hoodwinked or dismissed; their ire is almost certain to be raised when they believe their pockets are being picked in the process.

Somewhere at the intersection of Wall Street greed and tone deaf political acumen you will find the shattered remains of the $700 billion Bush-Paulson bailout plan. It collided on Monday with outrage on Main Street. Whatever else the proposal -which was narrowly rejected by the House of Representatives- was intended to do, its first priority was clearly one of bailing out the banks and players who caused much of the current economic crisis. The value to Wall Street of the vaguely crafted plan to buy back securities would have been immediate and clearly defined. The benefit to Main Street would have been longer in coming and more circumspect in specifics.

Wall Street’s reaction was a predictable plunge in the Dow. It closed with the largest single point drop in its history. The NASDAQ lost more than nine percent of its value. The Canadian TSX plunged by an unheard of 840 points. Unnoticed in all of this mayhem was the fact that the U.S. dollar actually rose as the bill faltered. The next day, more than half the losses were gained back.

The legislation as drafted, even altered from its original sparse and accountability-challenged state, gave too much discretion to the administration and offered too little assurance that its provisions are what the stalled credit system actually needs. The so-called oversight board for the bailout included the same actors who presided over the explosion of the crisis, denied the obvious storm clouds that were brewing and brought to the American people the draft that wanted no accountability whatever. The architects of the plan, and the ones running it, effectively would have been overseeing themselves. The Treasury secretary, the chairman of the Fed and the head of the Securities and Exchange Commission were named to the board in the plan rejected by the House. Monthly meetings were all the legislation required of the board overseeing some $700 billion in taxpayer funds. This is governance, Wall Street style. It’s one of the reasons why calamity has struck so many institutions and befallen so many investors.

Rarely has such an important and costly public policy initiative been as bungled, or its authors and sponsors so tone deaf to an already disbelieving and angry public. It is as if ordinary citizens were not even in the picture for all the heed paid to their concerns or to crafting a plan that would appeal to their sense of fairness and prudence. Not a good approach when 435 lawmakers have to face the voters in 35 days.

Maybe if a few Wall Street CEOs apologized to the public for the excesses and misjudgments of recent headlines and gave back a good portion of last year’s multibillion-dollar bonuses, people would have some faith that there are real leaders in charge. They might also be more predisposed to a bailout. Maybe if the plan did not start off trying to turn Henry M. Paulson Jr. into a modern King George III, with powers that could not be reviewed by any court or authority, initial reaction to the rescue plan would have been more positive. A reasonable mind might even question whether Secretary Paulson -a former Wall Street titan himself, who for some time has been in denial as to the depth of the problem- is really the best person to be hovering over the financial sector in a helicopter shoving billions out the window to his friends and colleagues.

Speaking about pushing money out the window: Since the beginning of the year, more than a trillion dollars has been pumped into the banking system by the U.S. Federal Reserve. On Sunday, the Fed boosted its currency-swap facility with foreign central banks to a total of $620 billion. Hundreds of billions more have already been paid out or committed for the Bear Stearns takeover, the seizure of AIG, the nationalization of Fannie Mae and Freddie Mac and the housing rescue plan passed in July. If these trillion-dollar-plus steps have failed to smash the ice jam in the flow of credit, what assurance is there that another $700 billion will? Does anyone really have a handle on the problem and what needs to be done to fix it, or are policy makers and regulators just hoping that if they keep throwing money at the problem it will get solved? At least 228 Congressional districts appear to be asking the same questions.

No doubt there are serious problems in the financial system.But little certainty has been offered that buying up structured investment vehicles and bad car loans from distressed banks will achieve stabilization in the housing market, which is the controlling declining asset base that is central to the whole problem.

Funneling $700 billion into the hands of the very actors that caused the financial crisis without any hearings or public consultation, and against the advice of some of the top economic minds in the nation -including several Nobel laureates, was a clumsy way of achieving the consent of the governed. The public rarely likes to be hoodwinked or dismissed; their ire is almost certain to be raised when they believe their pockets are being picked in the process. I seem to recall that the relationship between citizens and those who tax them featured rather prominently in America’s founding.

A sensitive and prudent plan would not have started off with targeting $700 billion at Wall Street. This only magnified the public perception of the wealth and privilege gap that is consuming America and fueling its indignation, which rather notably has reached a point not seen since 1929. It would not have attempted to secure a blank check with little oversight and absolute unreviewable powers. That was too reminiscent of other costly bungles by the Bush administration that did not unfold as promised. The lack of vision that has hobbled policy makers and regulators in the past, which saw them proclaiming the subprime fallout would be contained and where each bailout along the way has been portrayed as what was necessary to prevent a wider meltdown, did not bode well for their ability to get it right this time. The outcome seems unsurprising when you really think about it.

Investors would not lay out $700 billion for an ill-defined and uncertain plan run by people with this kind of track record. It is not surprising that American taxpayers are no different.