There is no substitute for a culture of integrity in organizations. Compliance alone with the law is not enough. History shows that those who make a practice of skating close to the edge always wind up going over the line. A higher bar of ethics performance is necessary. That bar needs to be set and monitored in the boardroom.  ~J. Richard Finlay writing in The Globe and Mail.

Sound governance is not some abstract ideal or utopian pipe dream. Nor does it occur by accident or through sudden outbreaks of altruism. It happens when leaders lead with integrity, when directors actually direct and when stakeholders demand the highest level of ethics and accountability.  ~ J. Richard Finlay in testimony before the Standing Committee on Banking, Commerce and the Economy, Senate of Canada.

The Finlay Centre for Corporate & Public Governance is the longest continuously cited voice on modern governance standards. Our work over the course of four decades helped to build the new paradigm of ethics and accountability by which many corporations and public institutions are judged today.

The Finlay Centre was founded by J. Richard Finlay, one of the world’s most prescient voices for sound boardroom practices, sanity in CEO pay and the ethical responsibilities of trusted leaders. He coined the term stakeholder capitalism in the 1980s.

We pioneered the attributes of environmental responsibility, social purposefulness and successful governance decades before the arrival of ESG. Today we are trying to rebuild the trust that many dubious ESG practices have shattered. 


We were the first to predict seismic boardroom flashpoints and downfalls and played key roles in regulatory milestones and reforms.

We’re working to advance the agenda of the new boardroom and public institution of today: diversity at the table; ethics that shine through a culture of integrity; the next chapter in stakeholder capitalism; and leadership that stands as an unrelenting champion for all stakeholders.

Our landmark work in creating what we called a culture of integrity and the ethical practices of trusted organizations has been praised, recognized and replicated around the world.


Our rich institutional memory, combined with a record of innovative thinking for tomorrow’s challenges, provide umatached resources to corporate and public sector players.

Trust is the asset that is unseen until it is shattered.  When crisis hits, we know a thing or two about how to rebuild trust— especially in turbulent times.

We’re still one of the world’s most recognized voices on CEO pay and the role of boards as compensation credibility gatekeepers. Somebody has to be.

Outrage of the Week: The Day the Supreme Court Expropriated Democracy

outrage 121.jpgThe greatest experiment in democracy the world has ever known, made great because of its concept of checks and balances, is about to become bought and paid for with checks from Walmart and the like.  It is a decision that is tailor-made to place a heavy coat of cynicism on a public already overly clothed in suspicion.

Having hijacked the U.S. Presidential election in 2000 in what even many conservative judicial scholars rate as one of the weakest and most contradictory legal rationales in U.S. Supreme Court history, the remnants of this group have now largely expropriated the democratic process and handed it over to the giant American corporation.

The putative privatization of political campaigns occurred with the 5-4 decision of the court handed down this week in Citizens United v. Federal Election Commission.  This was the case where Chief Justice Roberts, who eventually supported striking down the limits the law previously imposed on spending, thought the matter to be so important that he took the rare step of scheduling oral arguments during the court’s vacation period this past summer.  Some have drawn conclusions about what that says for the court’s willingness to do the bidding of moneyed interests.

Justice Kennedy, writing for the majority, which included the Chief Justice along with Justices Alito, Thomas and Scalia, cited the right of free speech in striking down existing limits on political spending by corporations (and other organizations).  But the First Amendment ought not, we think, to confer the right of any organization or group of organizations to have their opinions stand first and foremost.  This is precisely what will happen now that the floodgates are opened to unlimited election advocacy spending.  It will be the organization with the most money whose opinion will count the most, as anyone who has ever been involved in the political process knows.  Ask any candidate about the importance of money and advertising in politics today.  Ask what would happen if they were facing an opponent whose views were supported by a blank check.  How much chance would their voice have of being heard in the real world, which is clearly not the same one these five justices inhabit.

It can be argued that the decision also frees up limits on other groups and allows their voices to be heard more fully, creating some kind of abstract marketplace of ideas where the public ultimately weighs and determines the best political decision.  But this is a little like a naive first-year law student praising a legal system where it is held that all people have equal access to justice and that a plaintiff represented by a single country lawyer has the same chance to prevail as a giant corporation with thousand-dollar-an-hour attorneys backed up by armies of associates, investigators and paralegals.  The theory is nice, but talk to someone who has lived the experience and a different picture generally emerges.  Like a giant gorilla on a teeter-totter, money is almost always the greatest de-leveler in any electoral or judicial park.

This decision risks making political parties irrelevant; the real players will be the guys in the suits on K Street who will be stacking crates of cash behind their clients’ causes.  Lobbyists will have a field day; they will become in many ways a shadow government and Washington’s most influential policy makers.  Imagine that kind of power, if you will, in the hands of the big banks or the AIGs of the world, who brought you the worst financial meltdown since the Great Depression.  Imagine how much more banks will be able to enrich themselves by blunting the role of regulators and making sure, if Wall Street screws up again, it will have ready access to even more public bailout funds.  Imagine a world where drug companies and chemical producers no longer have to worry about a watchful FDA or other agencies who are supposed to protect consumers from faulty products.

In the majority decision, Justice Kennedy forcefully asserted “This Court now concludes that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption.”  Perhaps he has forgotten one of the lessons of Watergate.  Some thirty-five years ago, at the height of that scandal, it was revealed that more than 400 major U.S. corporations, including top names such as Gulf Oil, Exxon, Mobil and Lockheed were found to have made secret payments to foreign government officials around the world.  The Corrupt Foreign Practices Act was passed by Congress to ban such payments in the future.  Would a Congress where the campaign influence of these companies had no bounds pass such a law again?  Might it even repeal this one?

In a day where the power of large corporations and other organizations more and more outweighs the voice and interests of the ordinary individual, it is often during elections – and only during elections – where that voice has any real chance at all of being counted.  The growing size of entrenched interests and the frustration people feel in the face of established power lies at the heart of what we call turbo populism.  People do not want to see more great concentrations of power mounted against Main Street.  They are looking desperately for the opposite at a time when they have already had to pay too much for the abuse and incompetency of both Wall Street and Washington.  The decision is tailor-made to place a heavy coat of cynicism on a public already overly clothed in suspicion.

The Supreme Court did not hear that voice this week.  It heard only the self-aggrandizing views of those with a great deal of power and wealth who are determined to grab yet more. They are now able, unchecked, to use elections for that purpose.

Twice in the span of a decade, self-described conservative guardians against judicial activism have intruded into the democratic process on a scale no liberal judge would ever dare. The first effort shaped the outcome of a presidential vote.  Now they have set the stage for the wealthiest to shape all future outcomes.  The greatest experiment in democracy the world has ever known, made great in large part because of its concept of checks and balances, is about to become bought and paid for with checks from Walmart and the like.

Fear for the long-term health of democracy is an appropriate reaction to this decision, as Justice John Paul Stevens eloquently adumbrates in his passionate minority opinion.  But outrage quickly follows to fuel public demands for change and efforts to curb the threat this decision portends.

Fortunately, the largest corporations are still governed by securities regulations that can set out what decisions shareholders themselves are required to make.

Mr. President, give the SEC a call.

Outrage of the Week: Justice Thomas without Judgment

outrage 12.jpgSound judgment, whether inside the courtroom or out, is always the unswerving bodyguard that must accompany top judges. It may have been missing from Justice Thomas for some time.

When the United States Supreme Court ordered a stop to the recount in the 2000 presidential election in its momentous five to four decision, it handed George W. Bush the keys to the White House. It was an astonishing intervention in the democratic process unseen in the history of the nation. The second shoe in that controversial period dropped this week with the release of the autobiography of Justice Clarence Thomas, who was among the majority in Bush v. Gore. (more…)

Outrage of the Week: The Vanishing Stakeholder

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In too many ways, the primacy of the ordinary individual —as citizen, employee and investor— which has long been the backbone of modern social progress, is being left to disappear amid an onslaught of privileged special interests, civil rights-invading bureaucrats, unwatchful corporate guardians and greedy financial contortionists.

In Canada, it was the no-fly list, which the Harper government created to ban certain individuals from flights inside or leaving the country. In the United States, it was the no-sue list, which directors, executives and corporations now find themselves on courtesy of the Supreme Court’s 8-1 decision raising the bar for shareholders to commence litigation in respect of civil fraud. While they may seem unrelated, these two decisions share a common connection with an unsettling trend in the exercise of corporate and government power.

In too many ways, the primacy of the ordinary individual —as citizen, employee and investor— which has long been the backbone of modern social progress, is being left to disappear amid an onslaught of privileged special interests, civil rights-invading bureaucrats, unwatchful corporate guardians and greedy financial contortionists. We call this the Vanishing Stakeholder. Left unchecked, it is a trend that threatens to undermine the fabric of our society, our prosperity and our freedoms.

The U.S. decision, which was handed down this week, imposes standards that most investors, because they do not have the power to subpoena documents or to interview corporate parties such as directors and executives, can never meet. As a result of the Court’s ruling, investors must show “cogent and compelling” evidence of intent to defraud. Some, including Justice John Paul Stevens who dissented from the decision, believe the standard being set for this kind of civil litigation is as high as, if not higher than, that applied in criminal prosecutions. The decision pleased Bush administration officials and a large platoon of business lobbyists who have been moving toward a general loosening of post-Enron era reforms of the kind found in the Sarbanes-Oxley Act of 2002.

Under the Canadian program, which came into force this week, the government will identify people who pose “an immediate threat to aviation security” and place them on its no-fly list, without due process or prior notice. They might be part of a terrorist group, or, as Senator Ted Kennedy found himself after the U.S. introduced its version, someone with the same name as an embargoed passenger. They will only find out that they are on the list —or that they have been confused with some other person of the same name— just as they are about to board a plane. And the onus rests upon innocent people improperly placed on the list (has there ever been a major government effort that has not been bungled by bureaucratic incompetency or twisted by the vanity of some power drunk official?) to prove their innocence while being interrogated by law enforcement officials at the airport, in a closed room and without legal counsel. We thought that only happened in authoritarian regimes and in George Orwell’s fictional world.

But in the world that is becoming all too real for the treatment of individuals, shareholders are regularly seen as an inconvenience who need to be treated like annoying children instead of the owners of the corporate enterprise which they actually are. Citizens are viewed as suspects and potential lawbreakers in a time when even the library reading habits of young children cannot escape the alarmed and ever watchful gaze of law enforcement officials.

No sensible person wants to make it easier to clog the courts with frivolous lawsuits or for terrorists to plot their evil plans. But there has been a rising tendency of late to allow big corporations and big governments to become even more powerful and to make more difficult the ability of ordinary stakeholders to hold them to account. When that happens, fewer individuals, whether investors, employees or citizens, are inclined to stand up and assert their rights. Many fear the fix is in and that it is impossible to challenge the excesses and abuses of either government or business.

Last month, the U.S. Supreme Court made it more difficult for workers to sue in cases of pay discrimination under Title VII of the Civil Rights Act of 1964. In a 5-4 opinion, the Court held that such lawsuits —which almost invariably involve lower paid women— must be brought within 180 days of the initial alleged discriminatory act, not when the worker discovers it. And finding out what others in a factory or office are paid is not the easiest thing. Workers should not have to become pay stub sleuths in order to ensure that they are being fairly treated.

Ordinary investors, like average workers, are also getting the back of the hand from those in charge. Just look at the number of shareholder resolutions that have failed to win a bare majority in recent months when boards and management have opposed them —even resolutions like say on pay, which would have had only an advisory influence upon compensation committees. As for shareholder lawsuits —frivolous or otherwise— they are hardly an epidemic. Their numbers are considerably down in the years since Sarbanes-Oxley.

An equally disturbing trend is seen in the swallowing up of North American and European business icons by the elusive and expanding private equity whale. The stake that individuals have had as investors, and the benefits that come from being able to witness transparently the use of economic power and how it is wielded, seem now to be regarded by many commentators as only a passing fad in the natural evolution of a more concentrated form of capitalism —concentrated in fewer and richer hands, that is.

The current model of the publicly traded, widely-held, corporation, and its espoused link to the well-being of individuals, developed over a considerable period of time. Symbolized by the huge American flag that drapes the facade of the New York Stock Exchange, the motivating idea was that individuals could be something more than cogs in the wheel of capitalism; they could be the owners of its engines as well. Under this vision of the capital markets system, Wall Street and Main Street were inseparably linked. This idea was taken even further in the aftermath of the attacks of 9/11 with the posting of military personnel around the New York Stock Exchange. An attack on Wall Street was generally considered to be an attack on the financial nerve center of America itself.

Corporate leaders have consistently expressed the view that individuals have a genuine stake in American business —through pensions funds or mutual funds or as direct investors—and that such roles create a level of harmony between what’s good for most folks and what’s good for the modern corporation. As more and more companies begin to be taken over by essentially anonymous actors, or become absorbed by entities controlled by a few multi-billionaires, those interests may be starting to diverge. Indeed, there is some concern now as to exactly what role countries like China, headed by a dictatorial and communist regime, will have as their level of investment and alliance with private pools of corporate gobbling capital expands. Is this in the long-term interests of either democracy or society? Are policy makers and business leaders even pondering these kinds of questions? Again, the role of the individual in these new equations of commerce and capital seems essentially overlooked, if not regarded as entirely disposable.

The trend in this regard is paralleled by another significant phenomenon in the United States: widening economic division as reflected in the fact that the top one percent of households controls more wealth than at any time since 1929. As we have noted previously, it was a gap that ended abruptly –some might say catastrophically– at that time. There is little evidence that those at the top today are giving much thought to the impact of the current trend or exactly how much further it can be permitted to advance before serious damage is done to the social contract that has existed between the class of ordinary individuals and those in the upper tier of power and wealth. The average stakeholder has been just as absent from the cares of the corridors of privilege as he and she has been from participation in the income gains enjoyed in recent years. And, as we have documented repeatedly on these pages, few inside major corporations, much less the wider workforce, have seen anything approach the soaring level of pay advancement or galloping annual increases that CEOs and senior executives have received over the past decade.

Bear Stearns’s $3.2 billion bailout this week of a troubled hedge fund, and the sudden decline in the Dow Jones average as a result, is just one more in a series of telling reminders of how dependent individuals are on the guardians of capitalism and the watchdogs of sound business practice, including the credit rating agencies that seemed to miss the red flags. Recent testimony at the trial of Conrad Black from the high profile directors on Hollinger International’s audit committee, who admitted under oath that they did not read documents put before them, provides a vivid illustration of how boards so often fall short in their duties as stakeholders’ sentries. We would not be surprised to see further disturbing developments over the next several weeks as the world discovers (again) that the hedge fund kings and Wall Street wizards have not entirely rewritten the laws of market physics and may not be quite the extraordinary wonders their publicity departments or their huge fees would suggest.

As the Outrage of the Week prepares to take some time off for the summer, we think it is appropriate to leave on the larger note of concern for what we see as the receding role of the individual in society. We view this trend, where leaders in business and government are a little too quick to trample on a right here or remove a benefit there because it is the expedient or profitable thing to do when it comes to dealing with average stakeholders, as emerging on too many fronts to ignore.

Some of us actually believe that we live in a democracy. We like it that way. We take its freedoms and responsibilities seriously, including the idea of a market economy where individuals ultimately control even the mightiest pools of power. We are mindful of the continuing sacrifices made by men and women in countless battles around the world who have made our freedoms possible. If we wanted a different system, we would be living under any number of regimes that do not share a respectful belief in the role of the individual and who take a dim view of the rights of citizens or investors when they are exercised. The worry is that too many entrusted with power here are apt to forget that under our concept of democratic government and accountable markets, they are answerable to the people, not the other way around.

The Outrage may drop in from time to time, but will otherwise return to its regular weekly slot in early September. In the meantime, we thank our readers —affectionately known as our Outrangers— for your many suggestions for this well-read feature at Finlay ON Governance. We understand it is a frequent topic of conversation around the water cooler and at the kitchen table and has caught the eye of a few tycoons and political shakers on more than one occasion.

We wish them and everyone a safe and pleasant summer. There is much in the use and abuse of power and leadership that properly warrants our indignation. But there is also a good deal in the world around us among families and hard working people and in the wonders of nature that commends itself to our admiration and our gratefulness.

We hope you all have a chance to experience the latter to the fullest over the next several weeks, and that our many readers in the southern hemisphere have an equally pleasant winter.