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.

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The fact that Merrill’s risk committee did not function shows that this company was governed by a board that failed utterly in its duty to investors.

The magnitude of the losses was staggering on its own: nearly $10 billion for the final quarter of 2007. That was on top of the $2.3 billion loss for the previous quarter. Write-downs have exceeded more than $20 billion. Never in the storied history of Merrill Lynch have such figures been recorded. But the admission today of John Thain, the new CEO of the world’s biggest broker, takes all the oxygen out of the room:

“Merrill had a risk committee. It just didn’t function,” he told the Wall Street Journal.

His candid statement begs the question: Where was the board? Merrill’s proxy statement claims to have a board finance committee that “reviews our policies and procedures for managing exposure to market and credit risk and, when appropriate, reviews significant risk exposures and trends in these categories of risk.”

But the results show a rather different story. This is a board that was clearly inattentive to risk issues and failed utterly in its duty to instill a culture where management was fully and systematically addressing them. That, at least, was Mr. Thain’s message. It would have been impossible for any board that was even remotely within the Earth’s atmosphere in the past few years not to know that establishing standards for risk management and ensuring that they are being followed was a key part of its job. That, in large measure, is what the Sarbanes-Oxley Act is all about. In the text accompanying the legislation, the Senate banking committee noted:

The purpose of the bill is to address the systemic and structural weaknesses affecting our capital markets which were revealed by repeated failures of audit effectiveness and corporate financial and broker-dealer responsibility in recent months and years.

Those weaknesses are still there, at least within the Merrill Lynch boardroom. Yet American investors and regulators do not appear to have grasped the significance of what happened there. Nor have they asked how it was possible in an era of heightened corporate governance scrutiny and advanced technology for a board not to have known that multi-billion dollar risks were being incurred which could potentially imperil the company. And what do such shortcomings mean for the failure of corporate governance in the larger financial and banking sectors? You have to wonder if these directors, handsomely compensated to the tune of a quarter million dollars in cash and stock annually (committee chairs are paid more) have even heard of the name Enron to have been so lax in their governance practices.

It is bad enough that Merrill’s directors awarded former CEO Stanley O’Neal more than $40 million for his last full year on the job when he and they missed the warning signs of the disaster that was unfolding. It is a disgrace that they permitted a situation where he walked off with more than $160 million after presiding over the greatest losses in the company’s history. But to discover now that the board paid so little heed to risk oversight that such Titanic losses could be building is a betrayal of any acceptable concept of fiduciary responsibility to the investing public and everyone else who depends upon the proper functioning of the capital market. Such scandalous conduct would normally rise to the level of outrage on these pages. But there is more. The real disgrace, and our choice for the Outrage of the Week, is the fact that the directors who presided in slumber over one of the greatest financial disasters in American corporate history are still on the job –or at least continue to hold their posts on the Merrill Lynch board, whatever they are actually doing.