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.

Bank of America’s Record Settlement: The tsunami of wrongdoing and excess that caused barely a ripple of inconvenience at the top.

The indisputable economic (and moral) fact of our time is that America’s most wealthy, from whom capitalism’s CEOs, directors, guardians and gatekeepers  are drawn, not only allowed this torrent of financial chicanery and deception to occur, they profited handsomely from it.

These pages have voiced strong doubts over the years about the leadership and compensation practices that prevail at many of America’s corporations. Chief among the criticisms were that these plans provided incentives and rewards that caused companies to take improper risks which allowed CEOs to rack up huge gains in the short run while investors — and, ultimately, society — were left holding the costly bag of empty promises when reality came crashing down.

Take Bank of America, for example, which recently settled with the U.S. Justice Department by agreeing to pay a record $17 billion in penalties and restitution.  In the long history of American business, there has never been anything approaching this outsized penalty.  It stems from improprieties at Countrywide Financial, which B of A bought in another fit of misguided thinking, just before the onset of the Great Recession. There were also irregularities involving disclosures about its takeover of Merrill Lynch as well as with Bank of America’s own mortgage practices.

You might think that CEOs and boards are paid well for keeping companies out of trouble and avoiding these kinds of disasters.  Half of that observation is certainly true.  In the five years leading up to the crash of 2008 and the beginning of the worst recession since the Great Depression, B of A’s CEO Ken Lewis was paid more than $200 million.  Each of the bank’s directors awarded themselves a minimum of $1.5 million in the same period.  Many collected more.

When  he retired in 2009, Mr. Lewis walked away with a further $83 million in retirement benefits. Others connected with B of A, such as former Merrill Lynch CEO John Thain and Countrywide Financial’s former CEO Angelo Mozilo, also made off with huge fortunes as a result of deals made with the bank under Mr. Lewis.

And for all that, one of America’s most prominent financial institutions did not walk — it ran — into the giant propeller of U.S. government in a predictable and avoidable financial collision that resulted in this staggering record payout.

Bank of America was, as we documented over the course of several years, far from alone in practicing financial acrobatics that were more suited to a travelling carnival than an iconic institution of capitalism.  Yet in this mighty tsunami of boardroom wrongdoing and excess that nearly upended Main Street, barely a ripple of bother was felt among the first-class decks of Wall Street and America’s financial elites.  No CEO has been sent off to jail.  No director  or chief executive has been forced to return any pay.  As we noted in The Fallacy of Giantsin most cases when these kinds of eye-popping settlements are announced, the company’s stock shoots up.  Government fines, no matter how staggering, and accusations of abuse and betrayal by top management and boards, no matter how shameful, are regarded by many business insiders and much of the market as just another cost of doing business.

The indisputable economic (and moral) fact of our time is that America’s most wealthy, from whom capitalism’s CEOs, directors, guardians and gatekeepers  are drawn, not only allowed this torrent of financial chicanery and deception to occur, they profited handsomely from it.  The result is that those same elites in the period between 2007 and now managed to gain an even larger choke hold on the wealth and income of America than at any time since the 1920s.  This, despite the fact that were it not for the bailout provided by America’s taxpayers who largely live on Main Street, not only would this expansion of wealth not have occurred, but capitalism itself  might not have survived.  On that point, is it not interesting that the same voices that are generally quick to rail against government excess and demand fiscal discipline when it comes to the public purse are uncharacteristically silent when it comes to the $5 trillion the U.S. Fed paid to finance the bailout? Does that have any connection with reality, or is it just another case, like CEO compensation, for instance, where there is one set of ever accommodating rules for those at the top and another for everyone else?

What happened with Bank of America, and other prominent institutions like it, and the ease with which moral and legal improprieties can be sloughed off with little consequence for those in charge, is at the heart of the current record level of public disaffection with  capitalism and those who lead it. Having spent nearly half a century working with and around capitalism and its leaders, it is hard for me to imagine that one day it may cease to exist.  But the too often overlooked reality is that the fundamental currency that sustains modern capitalism is not capital at all — it is the consent of the public.

If present trends in income equality and  corporate immorality continue, and its leaders fail to ensure that capitalism is governed by a set of values that is consistent with the needs and dreams of Main Street, it is hard to imagine how it will survive.

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.

Kevin O’Leary got it wrong about the purpose of business

Once again, Kevin O’Leary is spewing ideas that put business at odds with the rest of society. Fresh from pronouncing his joy over the world’s widening wealth gap (it encourages more poor people to emulate billionaires, he says) Mr. O’Leary, who seems to relish playing the role on TV of something between Cornelius Vanderbilt and The Simpsons’ Mr. Burns, recently told CNBC’s morning audience that the only mission of modern corporations should be to maximize shareholder wealth.  He claims that companies that divert resources to help make society better are a serious threat to capitalism.  The only social responsibility of business is to make a profit, he says.

In reality, it is the views of people like Mr. O’Leary that pose the greatest threat to the free enterprise system.

Twice in the span of a century, and most recently beginning in 2007, capitalism has had to turn to society to bail it out and save it from its own excesses.  This is further evidence that capitalism requires the support of more than just investors.  Indeed, it is fully invested in how society perceives it and entirely dependent upon society’s goodwill on many different levels for its survival.

Gaining public favor and the approval of consumers is an asset that is indispensable to any successful business.  Far from detracting from the maximization of wealth for shareholders, boards of directors would be guilty of malpractice if they did not take reasonably appropriate steps to ensure their companies are, and are seen to be, valued contributors to the well-being of society.

Moreover, no business can expect to stay healthy in a society that is hobbled by ills that remain unaddressed and dreams that cannot be fulfilled.  Nor can investors, or society for that matter, afford to leave all the solutions to society’s problems to the frequent inefficiencies of big government.

Think of the evolution of GE, one of the most impressive long-term success stories in American business.  It is no coincidence that a succession of CEOs from Owen Young to Jeffrey Immelt have felt a strong sense of responsibility to serve the needs of society and an obligation to perform in ways that garnered public approval as well as shareholder wealth.

A final test of how bankrupt Mr. O’Leary’s argument is can be seen in the actions of the leaders of capitalism and its most valued corporate institutions.  Not a single one has ever publicly endorsed the idea that the only purpose of business is to maximize shareholder worth.  To the contrary, CEOs are constantly hitting the podium to talk about the initiatives their companies are taking, from environmental protection to mental health, which they believe will make the world better and win the approval of the public.  Many aspire to be dubbed among the top companies to work for as much as they do to be ranked as the most investor-friendly.

Having been a part of the process that has attempted to illuminate the interaction between business and society for some four decades now, I have participated in hundreds of discussions with business leaders in private meetings and in public forums.  What has struck me about that experience is that it has been those who embrace an expansive view of their responsibilities whose companies have excelled and become industry — and often stock market — leaders.  This is not to suggest that all companies effectively manage their social interactions; many do not.  Nor is it to suggest that most companies could not do a better job of improving value to shareholders.  In my experience, there are often too many vested and entrenched interests in a corporation that stand in the way of innovation, effectiveness and even profitability.

But when a genuine culture of responsibility is created within an organization, it infuses every aspect of its actions, including how it interacts with customers, employees and investors.  It drives the effort to add value to every phase of those interactions.  So if a company thinks it can improve the lot of some in the world, and enhance its own position in the process, such as by raising the minimum wage it pays its employees, as The Gap and other companies recently announced, or by supporting a program to provide opportunities to minority youth of the kind recently announced by U.S. President Barack Obama, few voices of opposition are heard.  In a modern recasting of Charlie Wilson’s observation about what is good for General Motors, investors today know that, by and large, what is good for society is most often good for business.

Capitalism would not have survived in the past, nor will it have any chance of flourishing in the future, if left to the folly of the ill-informed thoughts of people like Mr. O’Leary.  Capitalism works best, and ensures its longer-term survival, when it is driven by a wider set of values, and not just the creation of greater shareholder value.  These values include bringing a spirit of enterprise to the public agenda and acting in a manner that inspires the support and respect of all the stakeholders of modern business, and not just its stockholders.  Everyone needs to feel the benefits of capitalism.

No one who truly claims to support this flawed but still truly remarkable economic system could seriously argue otherwise.

The folly of entrenched interests

Recent Fed transcripts just another sign that those in charge too often don’t get it. 

The blindness of entrenched interests to the looming forces that threaten to disrupt their legitimacy and the lives of those who depend upon it is the defining failure in the governance of major institutions today.  Some work diligently to overcome that obstacle.  Most do not.

This was, and in many ways remains, a principal cause of the near collapse of the world’s financial markets in 2008, the economic downturn that continues to play havoc with countless lives today and the growing economic divide that threatens both the existence of the middle class and longer term social stability.  But this imperviousness to the restless arc of reality did not begin with the folly of Wall Street and the subprime mortgage fiasco nor did it end when the Dow Jones hit record heights.  It is alive today in our healthcare and education systems and in the loss of privacy at the hands of over-reaching governments and corporations that alternatively demand more personal information while failing too often to protect it.  Its fingerprints are found all over the institutions of democracy that are rapidly losing public respect.  It taints the interactions of governments and businesses each day with young people, the elderly and ordinary working families and causes too many to feel weary and resentful at getting the short end of the deal from those who seem immune from any accountability for their actions.

And it will continue to see the world stumble from scandal to crisis until major corporate and public institutions are distinguished by governance standards and ethical values that place primacy on the dignity and worth of individuals and not the self-aggrandizing conveniences of their leaders.

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.