The entry below is being cross posted from Marjorie Arons -Barron’s own blog.
Memo to Elizabeth Warren: wrap your arms around Greg Smith and get him to endorse your candidacy. The just departed Goldman Sachs vice president slammed the door loudly when he walked out, faulting the culture of overbearing greed at the Wall Street giant. According to Smith, everything at Goldman Sachs was about profit and nothing was about the well-being of the clients, who were referred to in a variety of disparaging ways, obviously behind their backs.
A key question is whether and to what extent Smith, a South African native (of Lithuanian Jewish heritage) and Stanford grad, had raised questions inside the firm about its contempt for its clients. If he had, his concerns still might have fallen on deaf ears. But that would make all the more understandable his dramatic op ed declaration in yesterday’s New York Times about why he was voluntarily leaving his $500,000 job. Perhaps not surprisingly, today’s Wall St. Journal dealt with the story only in a single article on how Goldman Sachs is doing damage control. Columnist David Weidner mocks Smith’s apparently recent discovery about Goldman’s longstanding business practices, noting “such idealism is only a priority after the profits have been booked.”
Reportedly Goldman Sachs CEO Lloyd Blankfein said a couple of years ago that the company “is doing God’s work.” He may be alone in his theology. It played a key role in the financial meltdown, partly by repackaging securities, slicing them and dicing them, selling the garbage to unsuspecting clients and then betting against them in the marketplace. Goldman Sachs has denied any wrongdoing even when a judge thought differently.
In corporate culture, Smith’s public criticism is a no-no, a sign of extreme disloyalty, which could make it difficult for him to find other employment on Wall Street. That’s the buzz in the financial media. But, if I were a Wall St. CEO and had confidence that my company performed according to high ethical standards, I might want to hire him immediately as a marketing distinction. That would send a message that a firm can have its client’s interests in the forefront and that we can, indeed, do well by doing good. Alas, that may be too much to ask.