IIn a modest sense, this is an inspiring development, an op-ed letter from a discouraged GS executive. The comments selected here also show further insights by readers.
Of course, from the perspective here at my blog with you all, this is only a mild defrosting. The views of Green Century Mutual Funds, founded by the PIRGs, is another level, as will be most credit unions. See the credit union entries here.
OP-ED
CONTRIBUTOR
Why
I Am Leaving Goldman Sachs
By
GREG SMITH
Published:
March 14, 2012
TODAY
is my last day at Goldman Sachs. After almost 12 years at the firm —
first as a summer intern while at Stanford, then in New York for 10
years, and now in London — I believe I have worked here long enough
to understand the trajectory of its culture, its people and its
identity. And I can honestly say that the environment now is as toxic
and destructive as I have ever seen it.
Victor
Kerlow
Related
To
put the problem in the simplest terms, the interests of the client
continue to be sidelined in the way the firm operates and thinks
about making money. Goldman Sachs is one of the world’s largest and
most important investment banks and it is too integral to global
finance to continue to act this way. The firm has veered so far from
the place I joined right out of college that I can no longer in good
conscience say that I identify with what it stands for.
It
might sound surprising to a skeptical public, but culture was always
a vital part of Goldman Sachs’s success. It revolved around
teamwork, integrity, a spirit of humility, and always doing right by
our clients. The culture was the secret sauce that made this place
great and allowed us to earn our clients’ trust for 143 years. It
wasn’t just about making money; this alone will not sustain a firm
for so long. It had something to do with pride and belief in the
organization. I am sad to say that I look around today and see
virtually no trace of the culture that made me love working for this
firm for many years. I no longer have the pride, or the belief.
But
this was not always the case. For more than a decade I recruited and
mentored candidates through our grueling interview process. I was
selected as one of 10 people (out of a firm of more than 30,000) to
appear on our recruiting video, which is played on every college
campus we visit around the world. In 2006 I managed the summer intern
program in sales and trading in New York for the 80 college students
who made the cut, out of the thousands who applied.
I
knew it was time to leave when I realized I could no longer look
students in the eye and tell them what a great place this was to
work.
When
the history books are written about Goldman Sachs, they may reflect
that the current chief executive officer, Lloyd C. Blankfein, and the
president, Gary D. Cohn, lost hold of the firm’s culture on their
watch. I truly believe that this decline in the firm’s moral fiber
represents the single most serious threat to its long-run survival.
Over
the course of my career I have had the privilege of advising two of
the largest hedge funds on the planet, five of the largest asset
managers in the United States, and three of the most prominent
sovereign wealth funds in the Middle East and Asia. My clients have a
total asset base of more than a trillion dollars. I have always taken
a lot of pride in advising my clients to do what I believe is right
for them, even if it means less money for the firm. This view is
becoming increasingly unpopular at Goldman Sachs. Another sign that
it was time to leave.
How
did we get here? The firm changed the way it thought about
leadership. Leadership used to be about ideas, setting an example and
doing the right thing. Today, if you make enough money for the firm
(and are not currently an ax murderer) you will be promoted into a
position of influence.
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.
OP-ED
CONTRIBUTOR
Why
I Am Leaving Goldman Sachs
Published:
March 14, 2012
(Page
2 of 2)
Today,
many of these leaders display a Goldman Sachs culture quotient of
exactly zero percent. I attend derivatives sales meetings where not
one single minute is spent asking questions about how we can help
clients. It’s purely about how we can make the most possible money
off of them. If you were an alien from Mars and sat in on one of
these meetings, you would believe that a client’s success or
progress was not part of the thought process at all.
Related
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.
It
astounds me how little senior management gets a basic truth: If
clients don’t trust you they will eventually stop doing business
with you. It doesn’t matter how smart you are.
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.
When
I was a first-year analyst I didn’t know where the bathroom was, or
how to tie my shoelaces. I was taught to be concerned with learning
the ropes, finding out what a derivative was, understanding finance,
getting to know our clients and what motivated them, learning how
they defined success and what we could do to help them get there.
....
for rest of article see link below
Greg
Smith is resigning today as a Goldman Sachs executive director and
head of the firm’s United States equity derivatives business in
Europe, the Middle East and Africa.
GT
LaBorde
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.
payaeger
A
moral decision is to be commended regardless of circumstance; coming
of age in a culture that prizes the making of money to the exclusion
of everything else makes reaching such a decision doubly difficult.
Mr Smith is to be congratulated for his personal revelation.
However,
the survival of the company pales next to the slow-motion chaos into
which this behavior - by no means confined to GS - plunges the real
world on a regular basis. Of course it's very clear that those
responsible are not the least bit interested, for reasons mentioned
in the article.
If Mr Smith is interested in clearing his
conscience, he might consider working to advance real regulation of
the industry - at the very least.
Tony
I
find that these testimonials are important to help change the corrupt
and rotten financial culture that surrounds our society. The sad part
is that a company like Goldman Sachs has far too much power and
controls not only the wealth of the wealthier, but also the wealth of
independent countries. After the 2008 collapse, independent States
all over the world have injected huge amounts of tax payers' money to
cover for the blatant mistakes and greed of Goldman Sachs (and
others). Now the people of the more vulnerable States, which little
industrial and productive power, are being sacrificed so that this
spiral of lunacy can continue. As a citizen of one of these countries
that is being sacrificed - Portugal - I demand that my elected
leaders stop pampering for these lunatic companies like Goldman Sachs
and stop imposing harsh austerity measures that will lead us nowhere
and will only destroy the social fabric of our country. However, I
fear that this will not happen, because as we saw in Italy and
Greece, when elected leaders stop cooperating with these powers they
are simply replaced by former Goldman Sachs executives...sad world we
are living in.
dpr
I
believe the change in culture you've seen at Goldman Sachs is just a
reflection of the change that has taken place in our national culture
over the last few decades. When I was growing up, no one considered a
person's wealth to be an absolute measure of his or her worth to
society. Now, for a large part of our culture, that has changed; the
acquisition of wealth is seen as good, no matter how it is
achieved.
Money-grubbing behavior is rewarded, and
victims of such behavior are considered fair game, not just at
Goldman Sachs, but everywhere. My cable company charges huge fees out
of proportion to what it delivers, but fails to adequately staff
customer service to field complaints. My bank has added ridiculous
fees for just about everything except were expressly prohibited by
law. I am put on hold for large swaths of time to get just about
anything fixed. There is a fervor for ever more tax cuts for the
wealthy, paid for on the backs of the middle class.
Our
whole attitude about what is important has changed, and in my
opinion, not for the better.
TH
I
don't think things have changed that much at GS in the last 12 years.
He must have joined right after the internet bubble collapsed, which
GS was a big part of, hyping companies that had no real business
plan. And then they moved right on to double-dealing toxic mortgage
products. So the only thing that might have changed in the last 12
years isn't GS' culture but Mr. Smith's assessment of that
culture.
The thing that really changed GS is the change from a
partnership to a public company in 1999, just before Mr. Smith
joined. Suddenly, the risks are off-loaded from leadership to
shareholders, quarterly earnings become the focus, and management is
free to wheel & deal any way they want to with little consequence
to them. That has created a huge moral hazard and nothing is being
done to control that.
NERO
It
seems to me that before GS removed its computers from their
preferential physical presence within the exchanges where they
apparently had an advanced view of all trades and were able to use
the information through computerized flash trading, and were they
were able to make ungodly amount of money based on the information
that everything was happy and peaceful there. Once they had to
compete on a level plane 2 years ago they found that making money was
very much harder, and the infighting among the parasites got nasty.
Several heads of the computerized trading department have been forced
to leave, and the derivative desk was obviously impacted. As long as
they were making very easy money everybody was friendly, but now the
knives are out.
Young
Banker
I'm
a few years out of college working in an entry-level role for one of
Goldman's competitors. I can already relate to many of Mr. Smith's
grievances. While I really believe in the inherent usefulness of
capital markets to society, I also understand that incentives are not
always aligned with my firm's mission and that conflicts of
interest--no matter how thoroughly disclosed and disseminated--are
often at the heart of the matter. This is particularly true for the
more well-compensated and visible "front office" that are
the principal revenue-initiating arms of the bank. Like Goldman, my
firm espouses to "do what's best for clients" and I can
honestly say that building relationships with clients is the most
deeply satisfying part of what I do. However, as I look to the
future, I see that performance reviews at the higher levels rely not
on customer satisfaction, sound leadership, and communication skills,
but on the ability to bring in assets. One might argue the two are
connected--that the ability to attract, retain, and build revenue is
evidence of these skills. But as Mr. Smith's article points out,
there are certainly ways to drive growth without holding a high level
of integrity. At my office, such examples abound. Many of our
managing directors are good people, but a notable few (including our
office's top performers) have considerable character concerns that
aren't addressed because the focus is money first, integrity second.
