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 purest treasure mortal times afford is spotless reputation.

Shakespeare, King Richard II

Two universal facts remain unchanged in the News Corporation saga of serial hacking and management misjudgments:  First, a company with a weak ethical culture, no matter how successful financially, will never fully survive the winds of public outrage when it flounders upon the shoals of moral misdeeds.  Secondly, it is the board of directors that must ultimately ensure that there is a culture of ethics that is unswervingly heeded and vigorously enforced in any major publicly traded corporation.   Given recent events, it is doubtful that News Corp’s board fully grasps its role as an ethical steward for the company.  Since eight out of 17 directors are insiders and family members, Rupert Murdoch holds the posts of CEO and board chair and the board itself met on only six occasions in 2010 (the last year for which such figures were reported) it is very unlikely that News Corp’s board understands its other duties as well.

It is no surprise, therefore, that Sir Roderick Eddington, the company’s most senior independent voice and so-called lead director, has not offered a word to shareholders or the public on the calamity facing News Corp.  In this kind of family dominated operation, the surprise would be that the board might exercise some independent thinking and step up to the plate which shareholders actually expect directors to occasionally grace. No company could possibly have a genuine culture of ethics and still find itself in such a state of public odium.  No serious board or senior management team could have allowed the warning signs that were evident years ago on this subject go unheeded.  It is particularly troublesome that James Murdoch, the so-called heir apparent, was prominent among that senior management group.  These are all signs that ethics was the missing voice in the News Corp boardroom.

This is a scene that has been played out in the great corporate fiascos of the past 100 years, from the demise of Penn Central Railroad and Barings to the collapse of Hollinger and Livent.  One might have thought a lesson would have been learned from the disintegration of Robert Maxwell’s media empire some years ago, which foundered in an ocean of corruption and deceit.  (Mr. Maxwell actually did drown at sea.)  But the only lasting lesson to be learned from these kinds of situations is that the lessons of the past are never remembered by those who need to remember them.

For more than four decades, I have been writing, commenting and advising on what I have called the high cost of ethical folly.  One of those articles from the past is reprised below. In these tragedies, which are always avoidable, the cast of actors  may change but their lines of feeble defense and mock surprise at the scandals that unfold on their watch remain immutable, as does the ultimate carnage of players and others at the end.  I have spent many a frustrating time over the years with skeptical boards and CEOs, trying to counsel a greater commitment to ethical issues only to see later that their blindness, indifference and arrogance has landed them in a very thick ethical soup.

What is amazing is that for all the progress there has been in the corporate world during this period, for all the sophisticated MBA programs and record levels of pay for CEOs and directors, not to mention the abundance of painful examples of moral failure, these silent ethical sentries of the boardroom are still tolerated.

Why?  Some thoughts, below, of more than a decade ago may still be valid.


BUSINESS ETHICS IS NOT A ‘SOFT’ ISSUE, IT’S A MATTER OF SURVIVAL: Until boards and management become serious about ethics there will be more Barings

J. Richard Finlay

11 March 1995

The Financial Post

(Copyright J. Richard Finlay)

What several European revolutions, two world wars and numerous depressions could not do to London’s Barings Bank in more than 200 years, one28-year-old employee accomplished with a few computer key strokes. And the bank collapsed.

Such is the high cost of ethical folly in the ’90s. It is a lesson that has been demonstrated before by companies such as Drexel Burnham Lambert Inc.,which could not survive the fallout from its conviction for securities fraud and the $600-million fine levied against it in the 1980s. Prudential Securities is still reeling from the estimated $1.4 billion in penalties and restitution costs arising from wrongdoings in its limited partnerships. Kidder, Peabody & Co.recently disappeared after a scandal involving phantom profits and lax accountability. And then there are the Canadian cases of Standard Trustco and the Northland Bank that were seized by regulators, leaving a trail of questions about ethics and accountability practices in their wake. Ethical concerns also have been raised in connection with the collapse of Confederation Life last summer.

What these examples demonstrate is that ethics, far from being the esoteric ”soft” issue many in business think it to be, is about as bottom-line focused as you can get. It is a key to survival in a financial world that depends more and more upon confidence and accountability as the twin pillars of success.

There is, however, no great surprise in the fact that these kinds of disasters continue to surface with predictable regularity. The real surprise is that there aren’t more of them. The structure of many companies almost invites such catastrophe. Most organizations have very weak codes of ethics that are poorly supervised and almost never audited. If the same approach were taken to financial performance, investors would desert the company in droves.

Short-term thinking, often prompted by the lure of quick profit, is another cause of ethical folly. In the case of Barings, management was alerted months ago to the inadequacies of its oversight systems. But management chose to ignore that advice, presumably because everyone seemed to benefit from the system as it was. ”Why fix something when it’s not broken?” is a bromide that many advocates of strengthened corporate ethics systems hear time and again. Ethics also gets short shrift because it is easy to ignore. Slap the pre-packaged code of ethics into the employee manual and you create the impression of an ethically sensitive organization. Drexel Burnham Lambert, Prudential Securities and Kidder, Peabody each had a code of ethics. But without a strategy for embedding ethics into the culture of the organization, without a commitment to making it an overriding component in every decision of the organization, a code of ethics is little more than window dressing.

Ethical performance doesn’t just happen. Like product quality, customer satisfaction, competitiveness and any other important ingredient of success, the ethical performance of a company needs to be managed. It requires clear goals, the understanding and involvement of employees, continuous training, regular evaluation, periodic auditing and, most of all, the commitment of top management.

It is this latter category that is so often the missing – and fatal – component in the ethical equation of organizations. Unless senior management is fully dedicated to ensuring the highest standards of ethical performance, and incorporates compliance and supervision practices into the structure of the organization, ethics will never move from theory to reality. In this connection, the role of the board of directors is paramount.

The board is ultimately responsible for preserving the integrity and the continuation of the organization. But too few boards have ethics committees or make regular examinations of the ethics practices of their organizations. Does the company have an ethics training program and hold ethics seminars?

Should an ethics ombudsman or external ethics counsellor be hired? Is there an adequate whistle-blower policy? Can outside members of the board be reached independent of top management?  Many scandals have developed because initial problems were covered up by management. As author Peter Drucker has noted, the board was always the last group to hear of trouble in the great business catastrophes of the 20th century. This latest disaster shows that many boards are still in the dark over such issues.

As the Barings saga unfolds, it will doubtless reveal the existence of warning signs that should have been heeded by management and the board, weaknesses in the bank’s accountability structure that no prudent firm should tolerate and excesses in behavior of the offending trader that should have sent up red flags everywhere. And people will say, as they always do in such cases, how could that have happened? The answer is that until boards and top management become serious about business ethics, and realize that it is survival ethics, such catastrophes cannot but continue to occur.

(Ed. note) J. Richard Finlay heads a Toronto-based management consulting firm specializing in ethics and governance issues.