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.

Today’s big new idea is wrapped in confusion, surrounded by conflicts and riddled with inconsistencies.  In many ways, it has become the problem itself.

ESG: ethical investor nirvana or predictable train wreck?

ESG, as they say, is a hot topic.  It’s made hotter by the huge stake big players have in what seems like an endless gravy train of fees, and by controversies over the efficacy of its mission.

When I began to write, research and promote the underlying ideas for today’s ESG – environmental stewardship, social responsibility and sound governance – in the 1970s, 1980s and 1990s, I was a trailblazer on a very uncrowded path. I saw those ideals as an answer to a good many problems of both business and society. Today’s ESG is an idea wrapped in confusion, surrounded by conflicts and riddled with inconsistencies.  In many ways, it has become the problem itself.

The consensus seems to be emerging that business is moving into vastly more complex and interdependent environments. In this new context, it will encounter growing numbers of people who simply refuse to accept the notion of economic efficiency and profit as the sole arbiters of corporate conduct and resource allocation. ~J. Richard Finlay, Business Quarterly, 1977

Forty – or even 30 – years ago, it was all but impossible to get boards and CEOs to see the impacts of their actions on the environment and on human rights issues. It was unthinkable that the boardroom needed to change. Many directors even refused to use the term corporate governance.

At one point, I turned to management consulting firms thinking they might be more open minded and future-oriented. But considerable effort to enlist the support of firms like McKinsey and Deloitte went equally unavailing. Nice lunches perhaps, but the dessert afterward was always ‘thanks, but no thanks.’

Today, these giant consulting firms are among those profiting most from the same drivers of change they had no time for previously. Maybe vision isn’t exactly their thing. McKinsey has spent much of the past decade lurching from scandal to scandal of its own making.  The company had to pay out $600 million to settle claims about its role in promoting Purdue Pharma’s opioid sales when thousands of people were dying from overdoses. Accusations of conflict of interest and an unbecoming coziness with giant carbon producers and autocratic regimes abound. But McKinsey still chalked up huge profits consulting on ESG risks in recent years – risks the company itself could not manage and for which it could not foresee the consequences. When I think of Barbara Tuchman’s aspects of folly, I always think of McKinsey as a classic example of the “illusion of invincible status.”

 At Deloitte, I spent many hours over several years trying to get its top managers to look at the potential of ESG-type values. I have an interesting Business Quarterly (at the time, a highly respected quarterly magazine published by the University of Western Ontario) issue from 1986. In one part, a predecessor of Deloitte, Touche Ross, outlines its ideas on the horizon for consulting in the next decade. The piece mentions everything from mining to telecommunications as big forces of change and opportunity. But not a word on the environment, social responsibility or governance, or the role of women in the workplace.

 For that, you would have to turn a few pages back to my 5,000-word paper on stakeholder capitalism, which was about everything ESG is trying to be today. Same magazine. Very different worlds exposed.  By the way, ESG business at Deloitte accounted for a big upswing in earnings recently. Advising on ESG risk has been profitable for Deloitte, with that stream of business adding to its global revenue for 2022.  The company has a lot to make up for. Since 2000, various units of Deloitte have paid more than a quarter-billion dollars in fines and penalties for a pantheon of wrongdoing. Like McKinsey, its failure to manage its own risk does not seem to encumber the firm’s ability to advise on the risk of others. But some will wonder if it nevertheless undermines the credibility of ESG because of who exactly is giving the advice.

 Similarly, Canada’s top chartered banks, like Royal Bank, BMO and TD could never catch what I was pitching. Not even in the early days of ethical investing of which I was a part. Bloomberg reports that ESG-related assets may hit $50 trillion by 2025. That $50 trillion figure woke them up. Have all the players that eschewed the forerunners of ESG suddenly developed a sense of prescience and commitment they did not possess decades ago, or are they just jumping on a very profitable bandwagon?

Having invested considerable time over decades to advance these ideas, I have some real concerns that those who have suddenly discovered ESG, with very little history behind them or role in its evolution, and a whole lot of new financial incentive to get it running as fast as possible, are making some serious mistakes. Frankly, I worry they may not possess either the breadth of intellectual capital or authenticity of commitment to make it work the way it needs to.

It now seems clear that the profitability and economic performance of a corporation will increasingly cease to be the sole criteria by which it is judged. A new set of legitimizers of public consent is coming to the fore, accelerated and strengthened by the harsh realization of the fragile interdependence that links our economy, our society and our environment. ~J. Richard Finlay, Business Quarterly, 1979

Over more years than I care to count, I have spent tens of thousands of hours in meetings with top business figures, including on traditional corporate strategy and crisis management issues. I have gotten to know many CEO and directors very well over this time. I have come to see the serious challenges that the boardroom mindset imposes on business thinking.  There is an almost chronic inability to embrace the benefits of cognitive diversity, along with a corresponding absence of curiosity about the world around them.  This hampers clear thinking and blunts innovation.  I have written about this boardroom syndrome for decades. There is remarkably little interest, or perhaps ability, to imagine a different future or one that comes at them from another direction that nobody thought possible. The captain and owners of the Titanic were that way, too.

With the great power wealth creates, arrogance is often an occupational harzzard. These are among the world’s top one percent of income earners.  They have a view of the world that looks pretty good from their perspective. When it comes to corporate governance – the door through which all ESG parties must enter – the status quo is working very well for them. And they really don’t want anyone they think might rock the boat and disturbe this self satisfied self portrait.

This is something that has always scared the heck out of me when it comes to risk management in companies and investment portfolios. You can’t prepare for a future you can’t see or even consider to be a possibility. Catastrophe always awaits the self-satisfied. I have been a big believer that Barbara Tuchman’s three attributes of folly should be emblazoned over every boardroom doorway. You could tack on a few I have discovered over the years, too.

The successful management of change has become one of the corporation’s top tasks. Women, unions, young people, academics, the media, governments, environmentalists, consumer crusaders and minority investors all represent the cause and effect of powerful forces demanding change within business. They will not be ignored.~J. Richard Finlay, Business Quarterly, 1978

Smart boards of the 1980s should begin to take note of the rising tide of what I have been calling stakeholder capitalism. It portends a sea change in the way the whole world of business works, just as Ralph Nader and Rachel Carson did for car makers and chemical producers. ~ J. Richard Finlay, excerpt from  a speech to The Conference Board of Canada, “The Board of Directors: Coping with Changing Expectations,” November, 1983

All through the 20th century and into the current one, we have witnessed tectonic events, like the global financial crisis of 2008, that could have been avoided but only a few – a very few – of us saw coming. Credit rating agencies, investment analysts and big boardrooms all had first class seats on the clattering train of excessive CEO pay, greed and subprime delusions. It was a train wreck in the making, but those in charge of the clattering train were asleep to the warning signals along the way.

Are rating agencies making the same mistake again?

Before Moscow sent troops into Ukraine on February 24, 2022, but well after the build up on its border, ESG raters gave Kremlin-backed Sberbank higher ratings for environmental, social and governance (ESG) risks than they did for some western lenders. This was when there were international trade sanctions in place against the bank. Prior to the war, Sustainalytics gave Sberbank a 21.47 score, better than the scores they gave to JPMorgan and Deutsche Bank at the same time.

All this is a long way of saying that when business or its advisors or fund managers talk about risk, and how well ESG allows investors to get a heads up when it counts, I am skeptical.

We are entering into an era in which the public appears determined that the future of society will be debated and decided significantly in terms of the power and purpose of the corporation itself. On that outcome rests not only the survival of the modern corporation but the shape and substance of democratic society itself. ~J. Richard Finlay, Business Quarterly, 1979

It is true that some things did change to get directors and CEOs on board with some of the ideas I was advancing decades ago. But I have a feeling it had less to do with a realization about the new legitimizers of public consent that were marching toward the boardroom, as I wrote in 1977, then it did about following the money.

Already well-paid gatekeepers in the corporate-investment ecosystem saw ESG as a hugely lucrative profit centre.  Rating agencies saw ESG as a potential gold mine for more fees, too.  And boardrooms saw it as an excuse for bigger top management bonuses while at the same time basking in the glow of corporate virtue signalling.

The advertising industry gets paid a small fortune to create campaigns to enhance the reputation of top companies, including with investors. ESG was an off-the-shelf, ready-to-go platform that offered instant goodwill from the very constituencies I predicted in 1977 were “refusing to accept economic efficiency and profit as the sole arbiter of corporate conduct and resource allocation.”

Things have not worked out for ESG as advertised by so many of its adherents, however.

More on that to come…

Stakeholder capitalism makes its first public appearance
in 1983

Every great idea has a beginning. While stakeholder capitalism evolved over a number of years, it was introduced first at a Toronto conference in 1983.

“I think if you ask most directors who are here today who they are accountable to, they will likely say shareholders of course. That’s understandable.  But it’s only part of the picture.

Today there is a host of new players who also have a claim on business. They are consumer activists, environmental watchdogs, social responsibility advocates, champions of women’s rights in business and in society, and ethical investors, to mention a few. They are called stakeholders because, while most may not own stock, they believe they are, by virtue of the power a corporation holds, just as invested in what companies do — or do not do — that affects the lives, health, economic well-being, ecosystem and human rights of everyone. They are determined to use their influence to change the way companies do business by working inside the system of capitalism itself.

Smart boards of the 1980s should begin to take note of the rising tide of what I have been calling stakeholder capitalism. It portends a sea change in the way the whole world of business works, just as Ralph Nader and Rachel Carson did for car makers and chemical producers.”

 ~ J. Richard Finlay, excerpt from a speech to The Conference Board of Canada, “The Board of Directors: Coping with Changing Expectations,” November, 1983.

Stakeholder capitalism is the lens through which ESG ought to be seen. It provides the basis for understanding the pillars of ethics and accountability on which the forerunners of ESG were built, and on which today’s ESG must rest if it is to be successful. It took many years to develop this idea through endless research, writing, speeches and interactions with investors, social responsibility advocates and top managers and directors. It didn’t happen by accident. But over the years it has had many collisions with those who have abused it.

One problem is that those who have hijacked SC and its original meaning, as I defined it nearly 40 years ago, have little understanding of it. To be honest, I’m not sure how much commitment they have to it.

Like ESG, that idea has been usurped by the wizards of financialization who envision the “s” in stakeholder as a dollar sign (as in $takeholder). That was not my vision, which was made clear in my numerous published papers over the course of a decade. It was not the vision that was conveyed in a column by one of Canada’s most distinguished business journalists when he wrote about my idea in The Globe and Mail in the 1980s.

Every great idea needs the moral fuel that can sustain the trust and common purpose that its adherents.  In the case of stakeholder capitalism, that common purpose is to fulfill the promise of the corporation to humanity, dignity and the planet, and in an economically viable manner.  There really is no room in it for those who latch on to it for a quick buck or market ploy, or for others to use it to cater to narcissistic egos and super rich globe-trotting acolytes on a Swiss mountain top, after their host suddenly claimed in 2020 that he invented it.

There is a revolution that is beginning to confront the major corporations of North America. Its driving force is a combination of social responsibility advocates and traditional shareholders. Together, these groups are united in their determination to extract a higher level of accountability and responsibility from today’s major corporations to ensure that corporate resources are used fairly and in ways that avoid posing danger to consumers, employees, the environment and the public interest.

This is the rise of stakeholder capitalism.  If it is successful, it could fundamentally alter accepted standards of corporate responsibility and performance.  ~J. Richard Finlay, excerpt from “Ethics and Accountability: The Rise of Stakeholder Capitalism,” Business Quarterly, 1986.

Acclaimed Globe and Mail business columnist Ronald  Anderson was a frequent follower of J. Richard Finlay’s work, having devoted half a dozen columns to his writing and speeches from 1976 to 1986, when Mr. Anderson retired.  Here is an excerpt from his column on J. Richard Finlay’s work on stakeholder capitalism.

J. Richard Finlay suggests that however difficult it may be for managers to balance business and ethical considerations, they no longer have the luxury of basing their decisions on their own private preferences.North America’s big corporations, he says, are being confronted by a combined force of minority shareholders demanding recognition of their rights and a new variety of ethical investors who insist on greater social justice.

 “Together, these groups are united in their determination to extract a higher level of accountability and responsibility from today’s major corporations,” he said in an article in Business Quarterly.  “This is the rise of stakeholder capitalism.”

Stakeholder capitalism, Mr. Finlay said, is based on the straightforward idea that what corporations do, or do not do, has a heavy influence on matters that are society’s most pressing concerns – the health of customers and workers, the livelihoods of employees and whole communities, women’s equality, causes such as the freedom of blacks in South Africa, environmental safety, and the integrity of financial and capital markets.

 “Accordingly, it is felt that the same constituencies have a stake in the kind of decisions corporations make and how they make them.”

Mr. Finlay lists several recent US and Canadian cases in which poor corporate ethics and lack of concern for public health and safety resulted in enormous costs. “Such examples,” he said “vividly demonstrate that a weak sense of corporate responsibility will almost invariably lead to a condition of financial peril and public harm.”  ~Ronald Anderson, “Corporate ethics a concern for all,” The Globe and Mail, July 1986.

I would be happy to hear from anyone who genuinely cares to pursue the idea of true 21st century stakeholder capitalism. It needs a reboot to take it away from those who are doing a disservice to its promise.

More to come on ESG soon.