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.

What an American civil war, two world wars and the Great Depression could not do has now been achieved by something called the subprime credit crisis, along with the assistance of an overly deferential corporate governance system that was blind to the risks being faced and a Napoleonesque CEO who could not see the disaster that was looming.

Richard S. Fuld, Jr. has always liked to run Lehman Brothers as though it were a one-man show.  The way the company’s fortunes are shrinking, it may come to that.  Short of a miracle in the form of a last-minute white knight, as of Monday, Lehman -Wall Street’s fourth-largest, and one of its most storied, investment dealers- will in all likelihood face bankruptcy. Frantic weekend-long meetings at New York Federal Reserve headquarters involving top government officials as well as leading Wall Street bankers, and Mr. Fuld, whose teetering firm prompted the emergency Friday detours from the Hamptons, have failed to produce the solution Lehman needs to stay afloat.   There is no buyer and no massive infusion of capital.  Bankruptcy lawyers have already been called in.

Lehman’s descent into the horror world of overleveraging and sagging confidence, insufficient capital and mounting losses, like that of Bear Stearns before it, must ultimately be seen as a failure in corporate governance.  It is the duty of every board to serve as a check on management and to take care that risks to the survival of the institution are scrupulously avoided.  As we noted some time ago, all meaningful positions of corporate power and responsibility have been vested in company CEO Richard Fuld.  He heads management as well as chairs the board.  He also chairs the executive committee, whose only other member is John D. Macomber, now 81 years old.   Mr. Fuld, whom Forbes reports received more than $354 million over the past five years,  has been the driving force behind the decisions that have brought the company to its plight.   It is a fall that might have been arrested by an active and engaged board of directors, except Lehman does not appear to have one.  What it has, instead, is a Dick Fuld fan club.

This is a board where, of the 10 independent directors, three are in their seventies and two are in their eighties.  The finance and risk committee, chaired by 80-year-old Henry Kaufman, as first revealed by Finlay ON Governance,  met only twice in 2007 and in early 2008 even when risk was becoming the 800-pound gorilla in every Wall Street boardroom.  The idea that some of Mr. Fuld’s power should be shared more broadly or that an independent director should head the board is not something these directors have tackled.

After other companies have been faced with multi-billion dollar losses -Merrill Lynch, Citigroup, AIG and UBS jump to mind- the CEO has been replaced.  At Lehman, it appears that the board and Mr. Fuld are determined that the fate of the company and its driving force will be inextricably intertwined, perhaps forgetting how that approach ended for Captain E.J. Smith and the ill-starred Titanic.  Not even Mr. Fuld’s now famously shortsighted proclamation, made several billion dollars in losses ago, that “the worst of the impact of the financial markets is behind us,” was enough to prompt the ire of his hand-picked directors.

For at least half a year, there have been signs, and rumors, of distress at Lehman.  There has also been evidence that management has been in a state of denial, as the conference call remarks last June by its former CFO, Erin Callan, revealed: “We stand extremely well capitalized to take advantage of these new opportunities.  From a risk management perspective, we continued to operate in our disciplined manner we’re known for.”

Over the ensuing weeks, losses and write-downs mounted.  Lehman’s stock has drifted, and at times plunged, since February.   But there is little evidence that the board itself became seized of the issue.  No changes in the governance regime were announced.  No special committee of independent directors was formed.  The obvious need for capital infusion, which the company frequently denied, was never answered adequately.  At one point, as recorded here previously,  the company was even taking on more shaky investments in the form of Alt A loans.

The market has been giving the board and management its unequivocal and unvarnished reaction for some time.  But there was scant evidence that Lehman’s boardroom really grasped the depth of the market’s dissatisfaction, or the untenability of its own financial condition, until last week, when the company’s .share price fell even below the level of Bear Stearns after its collapse and Fed-led rescue.  On Friday, the stock closed at $3.65.   Only seven months ago, it stood at $65.00.

It is the end of the Lehman era.  What an American civil war, two world wars and the Great Depression could not do has now been achieved by something called the subprime credit crisis.  It was ably assisted, or perhaps prompted, by a widespread attack of corporate amnesia regarding the dangers of treating risk without the respect it deserves and the failings of boards that slumbered while CEOs saw only the upside of deals and the compensation rewards they would bring and never the other part of the intractable law of gravity.

As far as power and accountability are concerned, there has been really only one man at Lehman Brothers.  That’s about the way it will wind up when the lights are turned out, the sign comes down and one of Wall Street’s longest running chapters comes to an end.   It is another sad lesson in the dangers of hubris, blindness to the realities of risk and the delusion of invincible status that too long marked the direction and culture of this fabled institution.