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.

Leonard Lance, (R.NJ): Mr. Cruikshank, to follow up in your remarks.   Do you believe there were corporate governance failures at Lehman?

Thomas Cruikshank, Chairman, Lehman board auit committee: No, I don’t. I think our governance procedures were really very, very good.

House Committee on Financial Services, April 20, 2010

A number of revealing facts emerged from testimony before Congress this week on the Lehman Brothers bankruptcy.  The Securities and Exchange Commission  said that, despite being aware of red flags, it did not believe it could press for any changes at the company where staff members were embedded for several months.  It appears some SEC staff had other things on their minds, however.

CEO Richard S. Fuld Jr. claimed he had no idea about the problems that were brewing and had never heard of any Repo 150 transactions.  And Thomas H. Cruikshank, chairman of the defunct investment banker’s audit committee and a Lehman director since 1996, pronounced that “(Lehman’s) governance procedures were really, very, very good.”

His statement came in response to a question from Rep. Leonard Lance (R-NJ), who accepted Mr. Cruikshank’s assurance without further question.  And that was all that was asked about board practices at Lehman.  The committee could have probed into some of the concerns we first raised on these pages nearly two years ago. It might have inquired whether it was really a good idea to concentrate so much power in Mr. Fuld, who was CEO, chairman and of the board and chairman of the board’s executive committee, or for half of Mr. Fuld’s handpicked board members to be in their seventies and eighties.  It could have looked at the executive committee, which had just two members — Mr. Fuld and John D. Macombre, who was in his eighties at the time the Lehman crisis was unfolding.  It might have cast its eyes on the risk committee of the board, which met on only two occasions in 2007, or considered whether several of the directors had been overloaded with responsibilities on other boards.  Was being an actress sufficient qualification to be a board member,or was a poor performance something that was common to all of Lehman’s directors?  The committee did not pursue any of these lines of inquiry.

In his voluminous report, Anton Valukas, the court appointed examiner for Lehman’s bankruptcy, gave the board a clean bill of health and said it did not know what was going on.   He could not point to anywhere management had actually informed the board of the extent of the risks that were being incurred or the undisclosed use of accounting tricks like Repo 150.  But he also does not cite a single case where directors asked discerning questions and where they were misled by management’s response.

However, in a scathing criticism of the SEC, Mr. Valukas told the committee:

The SEC did not ask the right questions.  It’s failure to ask about off-balance sheet transactions in the post Enron-era is hard to understand.

But it is also hard to understand why Mr. Valukas did not apply the same thinking to Lehman’s board, which he seems to exonerate because it was not told about wrong doing or alerted to red flags.  This, too, raises the ghost of the Enron board whose specter the examiner invoked.

On that point, it is unfortunate that neither Lehman investors nor legislators have had the benefit of an investigation such as the one the Enron board itself commissioned (much to its later dismay).  In an extensive and courageous probe conducted under the chairmanship of William Powers Jr., the report concluded that:

Enron’s “Board of Directors failed … in its oversight duties” with “serious consequences for Enron, its employees, and its shareholders.”  With respect to Enron’s questionable accounting practices, the Report found that “[w]hile the primary responsibility for the financial reporting abuses … lies with Management, … those abuses could and should have been prevented or detected at an earlier time had the Board been more aggressive and vigilant.

One wonders what at Lehman Brothers would have made the actions of its board so different or less deserving of scrutiny and condemnation than Enron’s. Would not a prudent board, faced with a crisis of unprecedented proportions in the capital markets, have made diligent inquiries of management that could have produced the answers needed to grasp the real extent of the company’s exposure?  What questions might it have asked of its auditors and management that would have enabled the firm to detect the unfolding disaster at an earlier time?  What steps could it have taken in its structure and composition as a board that would have made it more pro-active and less an array of Christmas lights that only work when the CEO turns them on?  Mr. Valukas’s report was unenlightening in this regard, as were Mr. Fuld and Mr. Cruikshank at the committee’s hearing.

Mr. Fuld was paid nearly half a billion dollars in salary, stock options and bonuses between 2000 and 2007.  In the same period, independent directors were paid approximately $20 million in fees and stock awards.  For that sum, shareholders saw the fabled firm that had been a Wall Street landmark for more than 150 years sink into the ground and the value of their stock plunge with it.

They can be grateful, however, that Lehman’s governance procedures were “very, very good.”  Had they not been as long-time director Thomas Cruikshank warranted and the Congressional committee accepted without challenge, instead of being faced with a calamitous outcome of historic proportions, investors would have had to deal merely with a catastrophe of unprecedented magnitude.

Such is the fantasy world that has long come to define corporate governance in America and the legislative and regulatory apparatus that permits it.