Moral Low Ground

Economy

‘The Moral High Ground’: Goldman Sachs Executive Director Greg Smith Quits “Morally Bankrupt” Firm in Disgust

It’s not very often that you see Goldman Sachs and “the moral high ground” in the same sentence, but every now and again some corporate one-percenter steps forward and shows the world that even in the belly of the insatiable hypercorporatist beast that is American capitalism, humanity is possible.

Today, that person is Greg Smith, an executive director and derivatives chief at Goldman who’s spent the last 12 years as a loyally devoted employee of the firm. No more. In a rousing New York Times op-ed piece today titled “Why I Am Leaving Goldman Sachs,” Smith vents his frustration at the firm’s lost direction and rapaciously blinkered pursuit of ever-increasing profits.

“I can honestly say that the environment now is as toxic and destructive as I have ever seen it,” Smith says of his (former) employer. He continues:

“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.”

Smith claims there was a time when Goldman’s corporate culture “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.”

The one-time college campus recruiter for the firm says he 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.”

Smith lays blame with CEO Lloyd C. Blanfein and President Gary D. Cohn, who “lost hold of the firm’s culture on their watch.” He also laments the way in which the firm increasingly views its clients as “muppets” to be milked for all they’re worth.

“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,” he writes. “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.”

“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.”

Smith concludes with this final bit of advice for the firm he called home for the past 12 years:

“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.”

Would that there were more Greg Smiths on Wall Street. For having the courage to step down rather than continue to be a part of a firm that is guilty of such crimes as creating mortgage-based investments that were sold to clients even though Goldman was betting against them (and so much more), Moral Low Ground salutes you, Mr. Smith! Best of luck in whatever endeavor you choose to pursue next.

 

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