By now, there can be no dedicated – or even slacker – follower of business who has not at least heard about Greg Smith’s very public resignation from his VP position at Goldman Sachs.
In a scathing indictment of Goldman’s culture and leadership, Smith put it all out there in an op-ed in The New York Times entitled Why I Am Leaving Goldman Sachs.
Talk about “Take This Job and Shove It”. This was one humdinger of a Johnny Paycheck moment, that’s for sure.
After 12 years with the firm, Smith wrote:
…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.
He lays the blame squarely at the office doors of CEO Lloyd Blankfein – he, the self-proclaimed doer of God’s work – and president Gary Cohn – who, he suggests:
…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 portrays a Goldman in which all that matters is making money. Making money for Goldman, that is. Making money for their clients, as Smith sees it, places a distant second – if it places at all. Clients – often referred to internally as “muppets” – serve mainly as dupes to take crap off of Goldman’s hands and/or make trades that will yield the greatest profits for the firm. Duping, of course, has become so much easier given the develop of complex, abstruse instruments that even the most sophisticated of investors may not understand. But if you flatter the muppets into thinking they get it, and they open their purse strings then, apparently, you’ll find that the streets at Goldman are paved with gold (for you, at any rate).
(Seriously, folks, in the history of Goldman has anyone made it to the upper echelons without making money for the firm? The point of Goldman is to make money. Maybe not at the complete and utter expense of its clients, but they’re not supposed to be do-gooders, other than the do-gooding of keeping capital markets working well and honestly. Which may not exactly be Wall Street’s strong suit of late. But do-good do-gooding is secondary for any (financial) firm. It comes when the guys making money write out their charitable checks.)
Needless to say, Smith’s letter went capital-V Viral. (It helps to get your start on The Times Op-Ed page, of course.)
Smith is variously depicted a paragon of integrity, a Brutus, a whiner. He’s cynical and/or naïve. Kind of like Inspector Renault in Casablanca who was, shocked, shocked to find gambling going on at Rick’s, all the while he was pocketing his percentage of the day’s take. After all, this is not the first time we’ve heard that Goldman acted for itself first and foremost.
On behalf of the fully naïve theory, Smith brags in his letter about winning a bronze medal in ping-pong at the Macchabiah Games in Israel, a boast that certainly can’t count for much on Wall Street (or Main Street), and which obviously leaves him open for plenty of derision. (Maybe if the bronze had been in extreme ping-pong…)
Some speculate that the timing is suspicious. With bonuses just paid out, they suspect that Smith’s departure was tied to his bonus check clearing – which might leach just a tiny bit of the high out of his high dudgeon. It’s also been leaked that Smith was pissed off by getting a lower-than-expected bonus this year, a further dudgeon eroder.
Some wonder whether he has his next gig lined up. Will he stay in the financial world? Find work as a crusader? Many commentators believe he will be a Wall Street persona non-grata for life.
Me? He may not be welcome in a large investment bank, but I suspect he could easily land in a smaller boutique firm that prides itself on how it treats its customers. (Be careful, Greg. Isn’t this what Goldman would say about itself, too?)
My wonder in all this is whether Smith had tried to raise his concerns internally first.
Of course, if the culture is so corrupt that would have gotten him nowhere – other than fired.
In the backdraft of the Smith letter, Goldman, not surprisingly, put its damage control apparatus promptly into motion. (By the way, this hit on Day Two of the new PR guy’s being on the job.) In a statement from Blankfein and Cohn the firm stated that its employee surveys showed that the vast majority of Goldman folks – 89% – say that Goldman provides its clients with exceptional service. Now, this might have meant a bit more if Goldman’s clients felt the same way, but a survey’s a survey. And we know that questions are never skewed, and those polled are always quite exacting in what they say, and always believe that they can be completely candid with no repercussions. (For all we know, some part of the Goldman bonus tied to whether employees believe they provide exceptional client service.)
There’s also a nice little dig at Smith, who has been frequently referred to as a Goldman executive, in the Lloyd and Gary letter. In rather tortured English, making the point that most VP’s also believe that Goldman does right by its clients, it was noted:
For the group of nearly 12,000 vice presidents, of which the author of today’s commentary was, that number was similarly high.
Okay. There are 12,000 vice presidents out of an employee population just north of 30,000? Kind of like Lake Woebegone, with all of its above average children. But a nice “subtle” putdown that Greg Smith was not exactly a Goldman executive.
But whether Smith was an executive or not. Whether he’s acting completely as a man of honor, or a man who’s had the cherished illusions that informed his self-definition shatter, or a man who’s peeved that he got a low-ball bonus – or, as so regularly happens in life, a combo package of all three and then some, Smith’s words matter.
Goldman stock dropped in their wake. Many voices are calling for Lloyd Blankfein’s scalp – or they would be, if he had any hair. And I’m sure that some clients are considering a move, and some prospects are making other choices. Meanwhile, a writer on Forbes posted an article over the weekend entitled “Deeper Inquiry Of Greg Smith's Assertions: Might Goldman Sachs Have Intentionally Precipitated The Financial Crisis?”
In the midst of pretty widespread suspicion about and disdain for Wall Street, it’s going to take a while for this one to go away.