Mr. Smith Goes Public on Goldman and Yawns Ensue

Posted on March 16, 2012 by mmjdiary

He was a 33-year-old executive director (equivalent of a vice president at a bank) at Goldman Sachs in London, Of course Goldman has 12,000 executive directors among its 33,000 employees, so he is a worker bee. “He” is Greg Smith and he had an op-ed piece in the March 15, 2012 issue of the New York Times. The piece describes Goldman’s callous attitude toward clients and calls the Goldman culture “toxic and destructive.” So, and? Tell us something we did not know.

The response to the piece is fascinating. The only denials are coming from within Goldman. One client said that the letter was “naïve,” and added, “Come on. that is what they do and they are good traders, so I do business with them.” Another client wrote to Mr. Smith, “You do not know me, but I am a client of Goldman Sachs. We trade a lot with Goldman and we know that we have to be very careful when we do so.” Funny, even the clients know how Goldman is and stay with Goldman for the exact reason Goldman treats clients the way it does – it’s all about the gains.

This is a firm whose CEO uttered, after congressional hearings revealed them to be hopelessly conflicted in their dealings with clients, “We are doing God’s work.” There’s a good chance that God is in the same position as Goldman’s clients – He doesn’t know Goldman’s in on the deal.

This is a firm once led by Jon Corzine, he who went on to head “I have no idea where the $1.6 billion in client funds is” MF Global.

This is a firm whose executives, when confronted with employees e-mails that called securities being sold to clients as “one s______ deal” responded, “I think that’s very unfortunate to have on email.”

This is a firm who was just chastised mightily by a Delaware Chancery Court judge (calling Goldman “selfish”) for being on ALL sides of a merger deal between Kinder Morgan and El Paso Natural Gas. Here’s a list to keep score of Goldman’s positions in that deal:
• Goldman was El Paso’s adviser
• Goldman was an investor in Kinder Morgan ($4 billion holder of equity)
• Lloyd Blankfein referred to Goldman’s dual roles in a letter to the CEO of El Paso as perhaps carrying “the appearance of a conflict”
• Goldman got $20 million for advising El Paso on the deal that had Kinder Morgan acquiring El Paso
• The Goldman adviser to El Paso himself owned $340,000 in Kinder Morgan stock
• El Paso had other options besides the Kinder Morgan proposal on the table
• Goldman did recommend that El Paso hire an additional adviser
• Goldman helped negotiate the contract for the new adviser – Morgan Stanley. But Morgan Stanley only got paid its fee if El Paso sold took the Kinder Morgan deal

A Morgan Stanley banker’s e-mail commented on these activities as the deal was going down, “This is GS at its most shameless.”
No, actually, that’s just Goldman Sachs. And you don’t see defenders coming out to deny young Mr. Smith’s allegations. Mr. Smith threw his career on the line to state publicly what everyone says and knows privately, within and without Goldman Sachs. This is a firm that cannot even see its own ethical issues. Sadly, its clients can see those ethical issues, but it’s all so profitable, they’re not walking away. Unless and until they do, Mr. Smith is not a lone voice for everyone knows Goldman is just Goldman, but he is crying in the wilderness. The wicked do prosper. Unfortunately, their clients cannot say no to coming along for the ride.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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