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.

Not to be lost in the recent accusations of accounting fraud involving former top management of Nortel is the fog that company’s financial statements continue to produce.

With its fourth restatement announced two weeks ago —the fourth in four years— Nortel landed firmly in the record books. No publicly traded company has ever had as many restatements in this period of time. Nortel changes its financial statements more often than some people change their hair styles. News of the latest re-do may well prompt investors to ask if the company is really in the telecom business or whether it has gone into the accounting restatement business. After all, the newest restatement will restate financial results that have themselves been the subject of previous restatements. Which begs the larger question: Has Nortel reached the point where it is reasonable to conclude that this once world class manufacturer of technology equipment is metaphysically incapable of producing accurate and reliable numbers to guide investors and company stakeholders? Evidence leans in that direction.

In January 2005, William Owens, Nortel’s then CEO, pronounced that with the release of the company’s restated financials for 2001, 2002 and 2003, a task which he claimed had been “monumental,” “we have a solid foundation on which to move forward with our business.” Then, under its new CEO, Mike Zafirovski, there was a further restatement in March of 2006. One would have thought that no stone would have been left unturned during the three previous reviews, and certainly the one conducted last March —the first to be carried out under Mr. Zafirovski’s tenure— to ensure that every possible contingency was fully considered in order to avoid just this kind of embarrassment.

By the way, the same Form 52 certifications under which the SEC is charging Nortel’s former CEO and CFO were signed by the current CEO and CFO on a regular basis. The period to be restated includes quarterly statements for 2006 and the annual results for 2005 to which both Mr. Zafirovski, as Nortel’s CEO, and CFO Peter Currie, attested as to their accuracy under the provisions of Sarbanes-Oxley. I would not want to be the CEO or the CFO who had to explain that one, since the whole purpose of this part of the legislation is to ensure the precision of financial statements and to avoid Enron-type cases where a CEO could claim to be taken by surprise by their inaccuracy.

One of the most underreported facts about Nortel was the astonishing revelation contained in its most recent annual report that the company’s auditors discovered five material deficiencies in its accounting control system. It boasts in its latest statements that it now has only one such deficiency. Nortel’s own auditors define a material deficiency as:

…a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

The auditors go on to note:

In our opinion, management’s assessment that Nortel did not maintain effective internal control over financial reporting as of December 31, 2005, is fairly stated….

Yikes! It’s hard to know whether fraud or just plain incompetency was the biggest threat to Nortel’s investors.

All of this brings us to corporate governance —not the ivory tower theory of corporate governance or a society columnist’s celebrity view of corporate governance, but the idea that directors will actually direct and protect investors. That kind of corporate governance.

During the time of Nortel’s major losses and irregularities, it had one of the top paid boards in Canada. The company boasted big name trophy directors. Several had financial and accounting backgrounds. Some sat on the boards of major banks. The fact that three Nortel directors sat on a committee reviewing board standards for Canada’s publicly traded companies, including Nortel’s then CEO John Roth and Guylaine Saucier, who chaired the panel, is something to file under the corporate governance category of Ripley’s Believe It or Not. (I raised a number of criticisms about this committee and its membership in my op-ed columns in The Globe and Mail at the time, which was prior to Nortel’s disaster coming to light.) Yet these directors not only presided over a series of embarrassing scandals and financial mishaps, but as Nortel’s auditors have stated, they failed to ensure adequate internal controls were in place. Several continue to serve on the boards of prominent Canadian companies today.

It might seem odd that failure is so well rewarded in the boardroom. But in the culture that too often prevails in the world of the corporate director, underperformance is rarely seen as an unaccommodating vice, and adherence to the rules of the club, of which thou shall not rock the boat heads the list, is typically viewed as a most admired virtue.

Fast forward to the current board. Under its governance, two restatements have already taken place in as many years. Hundreds of other large and complex companies routinely provide accurate financial statements to the investing public. They do not require repeated do-overs. Yet Nortel has become a serial re-stater of financial results. And the board appears to have hit the mute button regarding this latest fiasco, just as its predecessors did for too long. There are no statements of explanation from Nortel’s audit committee. Its well paid non-executive chairman is silent. And the board itself seems unable to issue a reassuring word. It gives the impression that Nortel’s directors see nothing out of the ordinary in this latest announcement –which is, perhaps more than anything, symbolic of the problem.

Instead, Nortel’s current board seems bent on following in the steps of its predecessors, who are remembered for a governance legacy that produced financial scandal and investor mistrust, huge sums being doled out to a former CEO who left the company in tatters, and a compromised system of financial controls whose effects continue to reverberate among investors.

Nortel was once filled with innovators and highly motivated employees. But with its inability to get out from under the cloud that has long followed its missteps and blunders, the time has come for investors to seriously consider whether the assets of the company would be better off in new hands. Here, the emphasis is on a board that is visible, engaged and capable of instilling confidence on the part of all the stakeholders needed for success –not clamping shut when crisis strikes.

Nortel needs a lot more than another accounting restatement. With its history so steeped in scandal and its present still darkened by constant financial backpedaling, it needs to think through whether Nortel can go on being Nortel.