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 President Who Made the Voting Possible

At times history and fate meet at a single time in a single place to shape a turning point in man’s unending search for freedom. So it was at Lexington and Concord. So it was a century ago at Appomattox. –President Lyndon B. Johnson, 1965

At a time when the first African-American has just been elected President of the United States, it is worthwhile to look at some of the other leaders who contributed to President-Elect Obama’s historic journey.

In March, 1965, President Lyndon Baines Johnson addressed a joint session of Congress to urge the passage of landmark voting rights legislation.  While language in parts of the speech is antiquated by today’s standards, it was groundbreaking at the time.  It had an eloquence that foreshadowed some of the thoughts in the victory speech of his successor in Chicago, 43 years later.  The Voting Rights Act was signed into law in 1965.  Without this single piece of legislation, it is doubtful that Mr. Obama could have been elected.  Without it, Johnson believed, America would not endure. 

Here is a clip from President Johnson’s historic speech.  His courageous, and controversial, determination to tear down the barriers between the races and bring the African-American community into the governance of their nation can never be overstated.  He would have been very proud to see an African-American member of his great Democratic party elected to the Presidency  yesterday.  And Americans can be very proud of President Johnson’s role in the soon-to-be 44th President’s success.

httpv://www.youtube.com/watch?v=MxEauRq1WxQ

Outrage of the Week: The Unbearable Costs of China’s Oppressive Rule

The price of tyranny is always corruption and the trampling of the human soul. These costs are now evident to the world, but more significantly, to the Chinese people, in a decimated Sichuan Province and in the shattered ruins of a thousand classrooms.

outrage 12.jpgWhen the earth opened up in central China two weeks ago, and the extent of the devastation and suffering became apparent, the world forgot about politics for a while and concentrated on the human dimension. Central committees and secret police forces, two functions long associated with communism, were the last thing on anyone’s mind. Many countries offered praise toward the Chinese regime for the openness it showed in permitting the world’s media to report on what happened. There were hopes expressed that things were changing for the better in the governance of the world’s most populous nation.

But all that came to a screeching halt when Beijing announced that it would allow families who lost their only child in the disaster to apply for a certificate permitting them to have another. So it is in this country, whose authoritarian regime regulates all aspects of society with no accountability or opposition, that human life is now subjected to the ultimate bureaucratic indignity. Like so many other things in China, childbirth is relegated to a mere transaction that requires some official stamp of approval. Perhaps it is a predictable Orwellian-style turn in a state where the government has such a formal antipathy toward organized religion and the practice of religious rights. One need look no further than recent events in Tibet for that evidence. But the larger question is: How short is the step between making decisions about birth and making them about the last frontier of human existence? Will it someday become inconvenient for the regime to permit older people who are sick to have the care they need? Once a government crosses the bridge and begins to dabble with decisions about birth, will it have any compunction about making the ultimate determination at the closing stages of life?

When, in North America last year, store shelves were stocked with poisoned dog food and tainted toothpaste, contaminated vitamin pills and children’s toys painted with lead -all the result of wrongdoing in China- the world was properly outraged. Some suggested, as we did on these pages, that such defects were the inevitable result of a society that lacked transparency, accountability and good government. With revelations that many of the buildings that collapsed in the earthquake, killing thousands of children, were the result of shoddy construction, now even some Chinese are beginning to look inward at their own system. The government’s spirit of openness in showing the world the aftermath of the tragedy has suddenly been shut to its own media’s examination of the corruption issues that led to such devastation.

The party officials and central committees, the policies that favor the friends of those in charge while muting dissent on the part of others, all have far-reaching consequences in the lives of ordinary people. The shameful misconduct of those responsible who allowed the construction of such substandard buildings is part of a longer litany of betrayal, from carcinogenic air pollution to contaminated lakes and rivers, that is leaving the Chinese people and their children a legacy of pain and disease that the world has seldom experienced on such a scale. It is being done in the name of profit, which, first and foremost, is about enriching the party bosses in Beijing and their friends, regardless of the costs.

What the rulers at the top do not grasp (as juntas, central committees and tyrants rarely do) is that it is not possible to indefinitely buy the loyalty of a society with the prospects of greater economic wealth while denying it the larger privileges of citizenship and basic human rights. The world, and in this respect the great people of China are no different, is not just the sum of its transactions and accounting statements. No amount of money can console the grieving parent of a lost child. Double-digit economic growth, which China’s regime has trumpeted for years, is no substitute for honesty and transparency in public governance. The price of tyranny is always corruption and the trampling of the human soul. These costs are now evident to the world, but more significantly, to the Chinese people themselves, in a decimated Sichuan Province and in the shattered ruins of a thousand classrooms.

Freedom and democracy are the only tools that give people the ability to hold the powerful to answer for their actions. Without the discipline of accountability, no organization, whether it is a corporation or a government, will function in a manner that serves anything but the vested interests of those on the inside and at the top. It is possible now, in their moment of national sadness, that this understanding will begin to gain new adherents among the Chinese people. They may well come to see that something of the old (but still very current) regime collapsed and fell into the rubble on that terrible day as a result of its endemic corruption and lack of transparency.

Many of the people in China who lost their only child must now look upon the government for their hope of another. But in that mournful gaze they might also begin to question if humans are not entitled as a fundamental right to make such decisions on their own, without the stamp of some government official posted on their bedroom door like a local building permit.

To live under the all-snooping eyes of such a corrupt regime stifles more than family life. It is an offense against human nature itself.

On Telecoms, Privacy and Tyranny

It is a perilous path when companies and governments decide that the law does not matter and the corporation is merely an agent of the state for however it may wish to monitor customers.

Yesterday, it was reported that the customer records of more than 3.4 million Canadians were stolen in mid-January. It took four weeks before the theft was revealed to Bell Canada’s customers. And while the information was eventually recovered, no explanation has been provided as to what shortcomings existed in its system that would have permitted such a huge breach of privacy. It is hard to imagine that these records were adequately protected if they could be stolen on such a scale. And their theft raises serious questions about how well more sensitive data, including the banking records of customers, is protected. The delay in bringing the breach to the public’s attention shows again that there is need for legislation that would force companies to advise customers immediately when a theft of their information occurs –not weeks after the fact.

Once again, we note that Canada’s Privacy Commissioner is noticeably absent from this file. Twenty-four hours after the theft was made public, the Commissioner’s website hasn’t even acknowledged the incident, much less indicated that it has commenced an investigation. Speed is not a function typically associated with this office. There still has been no explanation of the result of any investigation in connection with the disappearance in 2006 of the personal financial information of 470,000 CIBC customers, which we wrote about here.

In the United States, a breach of a different kind occurred yesterday, when the Senate voted to give giant telecoms immunity from lawsuits as a result of their assisting authorities in the warrantless wiretapping of calls made by their customers to overseas destinations. The telecoms, including giant AT&T, lobbied the Bush Administration and Congress for the bill, and they were more than happy to oblige. For its part, business expects that customers will play by the rules. Legions of lawyers are employed to ensure that they do. It is not unreasonable, it seems to us, that customers are entitled to expect that business will also play by the rules as they exist at the time, and when its does not, whether in privacy matters or wiretapping, consequences should follow.

Retroactive legislation seldom makes for good law or sound public policy. It is a perilous path when companies and governments decide that the law does not matter and that the corporation is merely an agent of the state for however it may wish to monitor customers. Yahoo’s CEO was recently castigated by the House Foreign Affairs Committee for that company’s role in turning over customer emails to security officials of the government of China. In the 1930s, major players in the German business sector eager to be seen as cooperating with the new Hitler Reich during its infamous Gleichschaltung period, volunteered to turn over personal information about their Jewish customers and employees. They argued it was in the national interest to do so.

Fighting terror is a necessary cause in the preservation of liberty and civilization. But in that fight, the distinction between the values of the terrorists and the values of their democratic targets must never be lost. Islamic extremists do not value individual rights, personal freedom or privacy. These are the hallmarks of western democracies. And when elected governments begin to erode these rights in the so-called defence of democracy, they place both in jeopardy.

Telecoms routinely boast about their commitments to protecting customer privacy. But these events show that individuals can depend little on such claims and even less upon the public officials and policy makers who are supposed to be on the frontline of ensuring that protection.

Outrage of the Week: Democracy’s Muted Voice at Davos

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How much further will it go to appease the non-democratic holders of oil wealth or American debt? After its major banks and corporations have succumbed to the influence that multi-billion dollar investment stakes invariably enjoy, will American foreign policy someday become a commodity to be bought and sold like offshore-made pieces of patio furniture at a local Wal-Mart?

There have been many voices at the World Economic Forum this week. There were the voices for combating climate change and the fight against poverty in Africa. There was the voice of Bill Gates, who, judging by media reaction and the response at Davos, single-handedly invented the concept of responsible capitalism. All these are worthy objectives. But one voice seemed notably muted: the voice for democracy. (more…)

Outrage of the Week: Maher Arar and the Folly of Colossus

outrage 12.jpgMaher Arar, the Canadian citizen who was detained at a New York airport in 2002 by U.S. officials and sent off to Syria where he was tortured, testified before the United States Congress yesterday —by video conference. He could not appear in person because he is barred from entering the U.S. on the grounds of alleged terrorist links, despite having been cleared earlier this year of having any such connections by an exhaustive public inquiry in Canada. As we noted here some months ago, the Canadian government has already apologized to Mr. Arar for its role in the travesty and paid him some $10 million in restitution. (more…)

The China Contagion

As we have been suggesting for a while now, the biggest and most damaging impact from China has not been the poisoned dog food or the counterfeit toothpaste, nor is it even the lead in children’s toys or the SARS epidemic which originated in China and almost shut down parts of Canada. Serious and unsettling as these have been, they pale in comparison to China’s apparent power to induce North American consumers to fall into a state of obliviousness and sleep walk into disaster in their pursuit of cheap products.

It seems many have forgotten that they are really dealing with and enriching a regime that is fundamentally corrupt, as any dictatorship which lacks principles of transparency and accountability fundamentally is. The West was too quick to grant China most favored nation status some years ago. It did so without thinking about the consequences —about the lost jobs at home, the appalling working and sanitary conditions in China or about making a communist totalitarian system one of the major creditors of the United States. We are beginning to see some of those consequences, just as we are the spectacle of what some companies will do in placing profits ahead of prudence.

As we have remarked before, the real concern is that this is just the tip of the iceberg and that a number of other shocks lie ahead —not just involving product safety but other ways in which the China contagion of corruption and deceit, along with its mounting wealth, has afflicted our society, our economy and our institutions.

It has long been said that there is no free lunch. If that is the case, perhaps we have all paid a much higher price than anticipated for the products we thought China was producing at bargain basement prices. What we observed a few months ago seems particularly fitting at this time of summer holidays and daily horrors in the marketplace.

None of us can afford to take a vacation from the stakeholder responsibilities we all have as citizens, consumers and investors, and when we do, the results can be chilling.