Greg Smith, formerly of the investment securities and investment firm Goldman Sachs, left a burning sermon of resignation in the pulpit at the New York Times yesterday. Today it’s still smoking.
Lamenting the culture shift at Goldman, Smith channeled his inner Jerry Maguire, writing about how…
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact….
These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen….
I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.
Reaction was strong and swift – roundups from The Wall Street Journal and The New York Times trying to capture the best of the zeitgeist of the responders. Goldman itself tore any mention of Smith’s name off of its web site and fired a volley.
In a company of our size, it is not shocking that some people could feel disgruntled. But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion. But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments….
Just two weeks ago, Goldman Sachs was named one of the best places to work in the United Kingdom, where this employee resides. The firm was the highest placed financial services company for the third consecutive year and was the only one in its peer group to make the top 25.
We are far from perfect, but where the firm has seen a problem, we’ve responded to it seriously and substantively….
It is unfortunate that all of you who worked so hard through a difficult environment over the last few years now have to respond to this.
On Rolling Stone’s site, longtime Goldman hater Matt Taibbi called Smith’s move “a brave and thoughtful piece of writing.”
There are a lot of people who just want to tear Wall Street down and start over again, but what Smith did in this piece was show that people like him can be part of the solution. What he did couldn’t have been easy – kudos to him, and let’s hope the inevitable blowback sent his way won’t be too rough.
Both Tyler Cowen of Marginal Revolution and Joshua M. Brown of The Reformed Broker argued that Smith’s lamentations were about a reality either long past or merely imagined, but in any case deeply naïve.
If you’ve been following the story, what do you make of it? Was it in the greater interest that Smith go out in such a blaze of glory, or by hurting his parent company, does he inflict other (consciously- or unconsciously-wrought) forms of collateral damage? (For example, GS ended its day on the NYSE 3.35% down.)
Is public conscience-wringing good for the soul in a world aware of Occupy Wall Street? Is it good for the company, or the country? Doesn’t fleecing people – if that’s what this is – deserve to be brought into the light? Or is Smith longing over a cultural ideal that can’t be retrieved? Is Goldman of a type of company that is too big not to weather a certain amount of harsh criticism?
I only know enough to be dangerous. Let the learned ones have at.