There has been quite a bit of commentary about Greg Smith’s resignation letter to Goldman-Sachs published in the New York Time’s Op-Ed section. Mr. Smith ascertains that the overall work environment focuses on making money for the company, even if it isn’t the right thing for the client. Adding fuel to the fire were disrespectful comments in which several employees referred to clients as “Muppets”. Another concerning element was Mr. Smith’s illustration that detailed how the company promoted leadership:
“What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.”
Interestingly, he points out that he knows of no illegal conduct, yet his letter is so very compelling that he may have very successfully marred the image of the company to turn off interest from potential clients, as well as highlight concerns from current clients. In addition, the comments section of the NYT’s Op-Ed comments section from reders is detailed with support for Mr. Smith’s efforts as well as some client validation supporting Mr. Smith’s assertions:
Thank you, Greg for speaking out. I have been a Goldman client since 2006, and have been trying to get my money out for several years now, to no avail. My money was placed in proprietary funds that have under-performed other similar investments and were clearly designed to maximize Goldman’s profit at my expense. I am not allowed to get money out of these investments, in some cases for up to 8-10 years, without a significant “haircut” (hmmm, I wonder if Goldman partners profit from the haircut??).
In one of these investments (which has lost 35% of its value since 2008), Goldman even refuses to provide basic information, like estimates of income or expenses for tax planning purposes. I literally have to guess the income my K-1 will show when I file my taxes in April, because Goldman won’t even give me an estimate (much less quarterly or annual commentary or disclosure by the fund managers). In many years, the fund shows substantial interest income (on which I have to pay taxes), but none of that income is ever distributed to me and the NAV of the fund simultaneously goes down. Where did the income go? When asked, Goldman refuses to provide specifics (even though I am a limited partner of the investment partnership and have a right to this information).
It is amazing how little Goldman cares about its customers. Goldman exists for the sole purpose of enriching its partners.
If customers band together to create a class-action lawsuit, Mr. Smith..you may in fact be going to Washington.
In response to Mr. Smith’s op-ed, Lloyd C. Blankfein, CEO of Goldman Sachs, and Gary D. Cohn, President and Chief Operating Officer, wrote a letter of their own in which they pulled out of their public relations tool chest an employee survey titled the “People Survey”. It went across the firm at all levels and revealed that 89 percent of employees said the firm provides exceptional service to its clients.
The response went on to say that “Anyone who feels otherwise has available to him or her a mechanism for anonymously expressing their concerns. We are not aware that the writer of the opinion piece expressed misgivings through this avenue, however, if an individual expresses issues, we examine them carefully and we will be doing so in this case.” Question, if Greg anonymously expressed his concerns how would Goldman Sachs know it was him? Let’s table that for now. While the letter provides some support on how employees may feel about the company, it may do little to comfort current clients, especially since comments support the lack of cultural integrity from former employees like this one:
Oh it must sting to be sitting in the GS HQ and to read Mr. Smith’s letter just now. I left a great position to join GS some years ago, mostly out of curiosity. The firm had interviewed ~28 people for the position and thought I’d give it a shot. I drank the Kool-Aid, but wondered if the firm lived up to its ideals. In the four years that I was there, I found that it did not. When commenting to management about having observed how my colleagues would accomplish important projects at far higher costs than necessary, I was advised of two things: 1) Be more humble as I was violating the firm’s “corporate culture” by being seen as “bragging” about the commercial efficiency of my transactions and enumerating the value of the cost savings achieved when compared to the decisions made by my colleagues (sometimes in the $M’s). My manager would refer to these funds as inconsequential, “a rounding error” on our balance sheet; 2) That I should not worry, because “GS isn’t and will never be the low cost provider of services.” In doing the best that was commercially possible, my behavior wasn’t consistent with the developing Goldman culture, and after four years, I was laid off. Thank goodness!
Clients might not be able to leave now due to restrictions imposed in the products they purchased from Goldman Sachs, so we might not see a mass exodus leave akin to advertisers from Rush Limbaugh’s recent controversial birth control/prostitute on-air commentary, but it may certainly thwart new business opportunities. That remains to be seen, and it depends on their crisis strategy. Social media will also play a crucial element.
Goldman Sachs has quite a bit of work to do in order to manage their corporate reputation. They need to begin to significantly highlight their good corporate deeds, both in the workplace and externally as well. It appears as if the reputation management strategy has already begun. The Goldman Sachs homepage illustrates its good corporate citizenship with a 10,000 women initiative to provide women entrepreneurs in developing countries a business and management education. To the immediate right of this is a link that will take you to their NYT’s response letter: http://www.goldmansachs.com/index.html
But this is just the beginning. It’s going to take more than an employee survey and website change to undue the harm Mr. Smith’s public assertions may have on clients and new business. While most client’s understand Goldman Sachs has to make money, they don’t want to be taken advantage of..as no one does.
Here are a few things we might see from Goldman Sachs in the future:
- Make public positive experiences from both employees and clients.
- Create a “Doctrine of Truth” that defines the corporate culture and inspires employee innovation, as well as encourages employees to do the right thing without ignoring complaints from employees. It can then be used to provide guidance on what needs to be changed and how these changes can be implemented, referencing insights directly from employees and clients. It also should include information on how it will respond to managers (repercussions) who do not report or take seriously employee complaints.
- Goldman Sachs should come clean about some of Mr. Smith’s assertions, apologize and fix them. Some of these might be the use of inappropriate or disrespectful language, such as referring to clients as “Muppet’s”. Goldman Sachs might consider suspending those involved for a short period without pay in an effort to illustrate the seriousness of this.
- Provide yearly updates and highlights, perhaps in a report card form, on the positive changes it has made for both employees and clients.
- Institute yearly social responsibility and ethical treatment of client’s certificate program that each employee complete.
Below are links:
Greg Smith’s Letter To Goldman Sachs in NYT’s Op-Ed
Goldman Sachs Public Response to NYT’s Op-Ed