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

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

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

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

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


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

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

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


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

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

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

The Frayed Plumage of the Davos Mentality

The czars and kings of Europe could not grasp why the people revolted against the high taxes, low wages, and hunger inflicted upon them by those who knew only opulence and self-aggrandizement.  The Davos mentality still cannot fully understand the resentment of a public saddled with massive unemployment and a bill for bailouts and social costs that soars into the trillions.

The annual winter parade of the puffed-up peacocks of privilege has come and gone at Davos.  The dire state of the world once again showed the courtesy not to intrude upon the gathering of major élites from business and government, permitting them to descend in their private jets and frolic at the best-catered parties in Europe.  Reality, as it generally does at the World Economic Forum each January, seemed to pass by, as well.

Last year, they missed the extent of the global financial meltdown – a big miss given that it is widely seen as the worst crisis in 70 years.  This year, they had trouble seeing what reforms are necessary to prevent such calamities in the future – or even that any are necessary.  In 2000, Enron CEO Ken Lay declared to his fellow Davos participants that his company was the “21st century corporation.”  In 2003, the gathering was abuzz over U.S. Secretary of State Colin Powell’s rock solid assertions that Saddam Hussein controlled “hidden weapons of mass destruction meant to intimidate Iraq’s neighbors.”   In 2008, former Treasury Secretary John Snow announced at Davos that any U.S. recession would be ”short and shallow.”

Reality, to those inclined to view it from the cloud-fringed temples of great heights or beyond the attended gates of deference and privilege, often appears fuzzy and ill-defined.

As it was with the monarchs of early 20th century Europe who presided over one calamity after another, those responsible for the failures and excesses that led up to the great financial crisis of the 21st century lack the vision to figure out the solution.  The czars and kings of that earlier era could not grasp why the people revolted against the high taxes, low wages, and hunger inflicted upon them by those who knew only opulence and self-aggrandizement.  The Davos mentality cannot fully understand the resentment of a public saddled with massive unemployment and a bill for bailouts and social costs that soars into the trillions that stems directly from the abuses, failures and negligence of those in charge of the world’s financial ship.  Like myopic despots who seldom bothered to read history, and inevitably stumbled into catastrophe over its unheeded lessons, these modern misguided princes of finance have already forgotten the events of the past year and seem headed for further anticipated collisions with the future.

Instead of striking an uplifting tone that shows the titans of Wall Street and its counterparts (or, perhaps, counterparties) actually “get it,” the spirit of Davos produced the grating sound of ingratitude and obliviousness.  Josef Ackermann, CEO of Deutsche Bank AG, talked about the “noble role” of banks and announced that the world should “stop the bank bashing, the blame game.”  Mr. Ackermann was chairman of this year’s forum at Davos.  Billionaire Stephen Schwarzman, a regular attendee at Davos, warned there could be costs to the public’s jaundiced attitude toward the banking system.  “My biggest concern is that, as a result of either proposals or tone, that financial institutions are going to feel under siege and their [sic] going to retreat with their extension of credit,” he told CNBC.  Lord Peter Levene, chairman of Lloyd’s of London, mocked government’s role in bailing out the financial system: “I’m from the government — I’m here to help. You guys in the industry don’t know what to do, so we’re going to fix it for you.”

How quickly they forget.  Citigroup, Bank of America, Wells Fargo, Bear Stearns, Lehman Brothers, Merrill Lynch, UBS, RBS, Lloyds, Fannie Mae, Freddy Mac, AIG and so many more, were all crumbling under the massive weight of writedowns and losses and a withering credit market that only government was able to repair.

Change, especially for those in the Davos world, often comes not in the reform that reality demands, but in the fantasy that overly indulged egos command.  Not surprisingly, there is a resistance in the world of high finance to adopting or supporting widespread financial reforms.  A reliance upon extended methods of liquidity and a zero Fed funds rate seems ingrained in business plans.  And in a culture where obsession with bulging bonuses still prevails, you have to wonder what kind of screwy financial Frankensteins are being assembled that may once again place institutions, and the public, at risk.  Paul Volcker, please take center stage.

Perhaps the irony is not entirely lost on the world that while many of its citizens shell out for the misjudgments of these Alpine participants, they also pay, as taxpayers, shareholders and customers, for this annual march into the snow drifts of élite folly.

When it comes right down to it, there are few thoughts the big players mount at Davos that could not be distilled into a simple Tweet.  Their use of technology and methods of transportation have changed, but in most other ways they are little different than the princes and grand dukes who trotted themselves out every so often to remind the people that they still existed, confusing – as receding fragments of supremacy so often do – vanity with relevance.

The World Economic Forum may have found its way onto YouTube.  But in most respects it is still a silent movie involving people whose attire might seem modern but whose sense of originality and connection with much of the world is as unfashionable and out of date as the Hapsburg dynasty.  One might have thought that the most costly financial crisis since the 1930s and the highest unemployment rates in decades would have produced a paradigm shift at Davos, too.  Instead, the world was treated to an encore performance of over-hyped élites desperately struggling to cling to any vestige of credibility and respect.  They have forgotten even the most recent past.  They have shown little vision for of the future.  This is not leadership.  It is an outrage.

As in previous years, we have included a YouTube film that gives an uncanny portrayal of the Davos mindset of another era.


Davos: The Spectacle of the Desperately Discredited Attempting to Flee the Apocalypse of their Own Creation

What the regulars at this fabled Swiss resort did not appear to grasp is that the breezier than usual air this year was the cold wind of change brought on by the bitter storm of betrayal and personal devastation that millions around the world have felt as a result of Wall Street’s greed and the failures of those expected to regulate it.

The Davos Style from Another Era

The annual procession of the pantheon of the overrated, otherwise known as the World Economic Forum, concluded this week.It ended with a bulletin:The forum’s members have not quite figured out how to get themselves (and us) out of the worst economic crisis since the Great Depression.

But Davos was never about ideas or innovation. And it has never been about vision. This is a group that can’t see ahead even a few months, much less the years they would like to profess.Today, it is about the desperately discredited attempting to flee the apocalypse of their own creation. Fearing, as others have during times of transition when the touchstones of power and privilege were crumbling and a new order was beginning to arise in their place, these CEOs and princes think that if they just stick together they might be able to survive.  Somehow they hope that the trillions that have vanished on their watch, and the trillions more that have had to be injected into their companies to avert Armageddon, will recede from the public consciousness and their previous status of unquestioned deference and unchallenged compensation will resume.  This is what the Davos crowd took from President Barack Obama’s inaugural address (loosely borrowed from Jerome Kern’s song of the same name) that it is in such times that America picks itself up, dusts itself off and starts over again.  A more contemporary songwriter might advise this group that you can’t always get what you want.

Having been escorted to the brink of ruin by the leaders who insisted they had all the answers (and made most of the rules), the public is not soon likely to entrust its fate to multimillionaires whose idea of tragedy is to be left off the A-list party circuit at Davos, and whose notions of governance and oversight are reflected in the fox-guarding-the-hen house board structure of the New York Federal Reserve, where, for instance, Richard Fuld Jr. was a director until the collapse of Lehman Brothers.  What the regulars at this fabled Swiss resort did not appear to grasp is that the breezier than usual air this year was the cold wind of change brought on by the bitter storm of betrayal and personal devastation that millions around the world have felt as a result of Wall Street’s greed and the failures of those expected to regulate it.

Two years ago on these pages -and much longer ago in other media- we talked about how visionless and out of touch this group had become. It is, in many ways, symbolic of the leadership deficit that created the circumstances of greed and over-leveraging, ineffective governance and inept regulation that brought the world to its economic knees.

Since the pampered, pumped-up participants at Davos predictably added few, if any, insights that were new, different or particularly hopeful this year, we thought we would reprint our observations from 2007.

Tell me one major sea-changing event that has been anticipated or predicted at Davos in the past two decades. Show me a crisis that has been averted. Everything takes place in rear-view time… In many respects the image is one of myopic leaders still sitting atop the overreaching and unsustainable and who refuse to recognize the existence of icebergs until the Titanic calamity occurs.

Of all the deficits and shortages in the world today, it is the lack of genuine character in so many leaders and the absence of truly transformative leadership that is the most striking. In this, Davos is an apt mirror. One sees in this annual Alpine pilgrimage to Davos fragments of the grainy black and white movies showing the imperial families of Europe gathering in their toy soldier costumes and opulent surroundings, oblivious to the marshalling clouds of change and discontent that would bring their primacy to an end.

It seemed to catch a glimpse of the wreckage to come.

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 Real Davos Question

The chic thing to do this year at the World Economic Forum was for top leaders to answer what was called the “Davos question:” What one thing do you think that countries, companies or individuals must do to make the world a better place in 2008? The answers were posted on You Tube. No investment banker, or Wall Street tycoon, answered the question. Many were at the Google to-die-for party, however, where there was the obligatory dancing with the stars.
Given the current unsettling state of the world’s economy, we think a better question might be: If all the high-priced investment banking talent which attended the WEF last year was unable to foresee the subprime disaster that was brewing under its nose, why should the world think this group will get it right for anything else? We don’t expect many responses from Wall Street to this question, either.

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

outrage 12.jpg

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

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

What the Subprime Meltdown and Davos Have in Common

This is a group, like the aloof royal families of early 20th century Europe, that seems chronically incapable of responding to reality until devastation arrives on stilts.

The timing was remarkable. In the same week that began with the world’s credit-battered capital markets falling off a cliff, the world’s rich and powerful opened their annual summit at Davos. But that’s not all the subprime investment vehicles that caused the commotion and the World Economic Forum have in common. Both were incredibly over-hyped. And both have been shown to be totally incapable of delivering what was promised. (more…)