Goldman Sachs executive Greg Smith is now famous as a result of his resignation letter, which was published in the op-ed pages of The New York Times today.
The letter written by Greg Smith, an executive director who had worked at the New York-based investment bank for 12 years, detailed what he felt was the company’s moral decline during his tenure. I can’t imagine Goldman Sachs will be too happy following the publication of this letter and I have no doubt they will lose business as a result of the quotes I have selected from the letter below as the most damaging.
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.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.
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.
The fact that he included specific grievances only helped to fan the flame of Wall Street-bashing. According to The Telegraph, in a memo to staff, Goldman chief executive Lloyd Blankfein said he was “disappointed to read the assertions… that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm”.
Mr Blankfein wrote that although it was “not shocking that some people could feel disgruntled” in a company of Goldman’s size (it has 30,000 employees) and that the firm is “far from perfect”, he expects staff to “find the words you read today foreign from your own day-to-day experiences”.