J. Richard Finlay
The most corrosive force in modern business today is excessive CEO compensation. Such lofty sums tempt CEOs to take actions that artificially push up the price of the stock in ways that cannot be sustained, and to cash out before the inevitable fall.
J. Richard Finlay, Submission to the Committee on Banking, Housing and Urban Affairs, United States Senate, May 2002 (Hearings leading to the passage of the Sarbanes-Oxley Act of 2002).
A reputation for prescience has become his professional signature. His early warnings about the consequences of directors who do not direct and the dangers of excessive CEO pay read like a chronicle of disaster foretold in an era of scandals typified by Enron, WorldCom, Hollinger, and more recently, Bear Stearns, Lehman Brothers and, ultimately, the most costly financial crisis since the Great Depression. Today, J. Richard Finlay is one of North America’s most quoted authorities on principles of responsible capitalism and the promise of the well-governed corporation, which, increasingly, demands a return to sanity in CEO pay and the boardroom leadership that awards it. He founded and heads The Centre for Corporate & Public Governance, the first fully independent think tank of its kind dedicated to advancing higher standards of ethics, transparency and accountability in major corporations and public institutions. Richard is is regularly called upon to advise sovereign governments, regulatory authorities and scholarly centers. He is the editor and publisher of Finlay ON Governance, the popular weblog that is read and quoted around the world.
It has been his first hand-experience in the boardroom and with major public institutions over the course of his 30 year career that has made Richard acutely aware of the role that ethics and sound governance play in the success of organizations and of the consequences when they are absent. Richard was frequently called upon to assist in the revitalization and strategic renewal of top NYSE and TSX listed companies as well advise in the creation and re-building of a number of public institutions. Political leaders and policy makers in Canada and the United States have turned to Richard for his insights and counsel for more than three decades. His work and ideas were influential in speeches and economic policy initiatives by Canada’s 15th Prime Minister, the Right Honourable Pierre E. Trudeau and have been referenced in debates in Canada’s House of Commons and Senate and cited in the United States Congress. Richard also played a prominent role in the formative years of the Niagara Institute think tank on leadership and public affairs matters in the 1970s and 80s that included regular participation by top world scholars and decision makers. His commentaries and ideas have been referenced in several dozen books, including Peter C. Newman’s bestseller, Titans and the 2010 top seller Money for Nothing by John Gillespie and David Zweig.
Richard has been a pioneer in the development of modern concepts about corporate responsibility and social entrepreneurship. His ideas on stakeholder capitalism —a term he coined in the 1980s— and on principles of ethical leadership and sound governance have influenced generations of managers, scholars and thoughtful individuals. An award-winning writer, his articles and commentaries have appeared in academic journals and Op-Ed columns of leading newspapers since the 1970s.
Richard’s submissions to committees of the United States Congress, the Canadian Senate and senior regulatory agencies have helped to establish groundbreaking policy directions in corporate governance practices and have foreshadowed seminal events in North American business. He was the first authority in his field to be called as an expert witness in corporate governance before the banking committee of Canada’s Senate, where his testimony warned of further scandals and failures in the absence of tougher boardroom standards, harmonized securities regulation and more vigorous white collar law enforcement. As scandals unfolded at Bre-X, Livent, YBM Magnex, RT Capital, Nortel and Hollinger, legislators and regulators turned again to Richard for his prescriptions for reform and advice in drafting new corporate governance legislation.
One of North America’s most vocal critics of excessive CEO compensation, and the rise of what he calls a New Gilded Age of CEO excess, Richard alerted committees of the U.S. House of Representatives, the Senate and key policy makers to the wider consequences of pay abuse long before its was linked to the greatest global financial crisis and Wall Street implosion since the 1930s. In his submission to the Senate Committee on Banking, Housing and Urban Affairs during its hearings leading to the passage of the Sarbanes-Oxley Act of 2002, Richard called spiraling CEO pay —and the disengaged boardroom practices that permit it— the most corrosive influence in American business. He warned of a coming backlash against Titanic sized pay and bonuses, a prediction born out today in public opinion, populist unrest and government intervention in the marketplace.
He was the first to raise issues regarding the corporate governance practices and board composition of Research In Motion and Apple Computer when questions surfaced about their stock option dating practices. Shortly after, both companies made significant remedial boardroom changes, including adding a woman to their previously all-male boards. Richard has been among North America’s most consistent voices for the appointment of more women to corporate boards.
Richard predicted even before its eventual passage that the U.S. government’s $700-million plus TARP initiative would become one of the biggest financial boondoggles in modern American history. Shortly after its inception, it became mired in controversy, contradiction and widespread public outrage, even among original supporters in the House and Senate. He was the first to hoist red flags about the governance failures at Hollinger, Countrywide Financial, Bear Stearns, Lehman Brothers and Merrill Lynch —well in advance of their collapse and/or rescue. He was also the first to identify concerns about conflict of interest over the board composition and governance practices of the New York Federal Reserve in the context of the Wall Street bailout and the prudent regulation of investment banking activities — a fact now noted in Wikipedia.
BusinessWeek featured Richard’s ideas on executive compensation, where he termed outsized trends in CEO pay “the mad cow disease of the North American boardroom,” in its cover story The Crisis in Corporate Governance. He was one of the earliest critics of the management-dominated governance and compensation practices of the Hollinger companies, which failures were widely documented in the trial and criminal conviction of Conrad M. Black and other Hollinger executives in 2007, and of Livent, whose founders, Garth Drabinsky and Myron Gotleib, were convicted of accounting fraud and forgery in 2009.
Richard’s views on corporate governance, ethical leadership, organizational accountability and compensation issues have been cited in the world’s top media, including The New York Times, Wall Street Journal, Financial Times, New York Post, Bloomberg, Reuters, on CBS Radio and the CBC, and in Germany’s Focusmagazine and Brazil’s AE Investimentos. He is an occasional contributor to the corporate governance blog of Harvard Law School. The Associated Press quoted Richard extensively in its annual survey on U.S. executive compensation, which appeared in several hundred newspapers and media outlets around the world.
In addition to his role as the unpaid head, principal benefactor and founder of The Centre for Corporate & Public Governance, Richard is active as a global champion of strengthened ethics, transparency and accountability in the governance and leadership of major corporations and public institutions. He frequently works with thoughtful investors, socially conscious entrepreneurs and enlightened institutions in spearheading strategies and ventures that build upon these ideas and the principles of responsible capitalism. Richard calls this capitalism governed by values.
His passionate belief in responsible capitalism, the promise of the well-governed corporation and the role of the individual in preserving freedom and prosperity have made Richard a sought out commentator and a popular speaker to professional groups and organizations for more than three decades.