March 14th, 2012
Econintersect: Greg Smith has resigned his position as Executive Director at Goldman Sachs (NYSE:GS). That may not be big news but the way he did it is. Smith, who worked at the famous investment bank for the past twelve years, wrote an open letter of resignation which has been published in The New York Times. Smith describes the environment at Goldman as “toxic and destructive.” Smith, who has worked in both the New York and London offices of the company after graduating from Stanford University, says the investment bank focuses on how to make more money off people rather than how to help them. (Click on picture for larger view of vampire squid looking for a client.)
Follow up:Smith says that Goldman Sachs has lost its way. He writes:
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.
Smith feels that history will have a harsh judgement for Goldman and its current management:
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.
Smith says that Goldman’s managing directors refer to their clients as muppets and talk of “ripping put eyeballs” among analysts is common. “Getting paid” is the common objective.
Nathan Vardi has a dismissive view of what has happened published in Forbes. Vardi calls Smith the victim of a “mid-life crisis” and “obviously disappointed about where his promising life has taken him.”
David Enrich in The Wall Street Journal writes:
A person familiar with the matter said Mr. Smith’s role is actually vice president, a relatively junior position held by thousands of Goldman employees around the world. And Mr. Smith is the only employee in the derivatives business that he heads, this person said.
An article in the Huffington Post describes how The Times “vetted” the story before publishing. According to that article the paper did not consult with anyone at Goldman before publishing the Smith Op-Ed.
And was this an epiphany? Tunku Varadarajan (in The Daily Beast) asks, did Greg Smith just wake up from a fairyland?
The following video from ABC News summarizes the story and contains a statement in response from Goldman Sachs:
Reading all the varied interpretations of what is flying around the media today, Econintersect wonders if it all comes down to one man’s vampire squid being another man’s cash cow.
Read below the complete statement sent by Lloyd Blankfein and Gary Cohn to Goldman employees.
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The following is the message Lloyd C. Blankfein and Gary D. Cohn sent March 14, 2012 to the people of Goldman Sachs.
By now, many of you have read the submission in today’s New York Times by a former employee of the firm. Needless to say, we were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.
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.
While we expect you find the words you read today foreign from your own day-to-day experiences, we wanted to remind you what we, as a firm – individually and collectively – think about Goldman Sachs and our client-driven culture.
First, 85 percent of the firm responded to our recent People Survey, which provides the most detailed and comprehensive review to determine how our people feel about Goldman Sachs and the work they do.
And, what do our people think about how we interact with our clients? Across the firm at all levels, 89 percent of you said that the firm provides exceptional service to them. For the group of nearly 12,000 vice presidents, of which the author of today’s commentary was, that number was similarly high.
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.
Our firm has had its share of challenges during and after the financial crisis, but your pride in Goldman Sachs is clear. You’ve not only told us, you have told external surveys.
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. And we have demonstrated that fact.
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. But, our response is best demonstrated in how we really work with and help our clients through our commitment to their long-term interests. That priority has distinguished us in the past, through the financial crisis and today.
Lloyd C. Blankfein
Gary D. Cohn
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- Why I Am Leaving Goldman Sachs (Greg Smith, The New York Times, 14 March 2012)
- Greg Smith Isn’t A Whistleblower, He’s Just a Goldman Sachs Executive Having a Midlife Crisis (Nathan Vardi, Forbes, 14 March 2012)
- Goldman Rejects Claims Made by Outgoing Executive (David Enrich, The Wall Street Journal, 14 March 2012)
- Greg Smith’s Goldman Sachs Resignation Letter Was ‘Vetted’ By New York Times (Michael Calderone, Huffington Post, 14 March 2012)
- Goldman Sachs Exec Greg Smith Resigns (ABC News video, 14 March 2012)
- Goldman Sachs Executive Quits In a New York Times Piece, Did He Just Realize What Goldman Does? (Tunku Varadarajan, The Daily Beast, 14 March 2012)
Hat tip to Roger Erickson.