Saturday, 5 August 2006

The toxic, destructive Goldman Sachs environment

On 14 March 2012, Greg Smith, head of Goldman Sachs' equity derivatives business in Europe, the Middle East and Africa, said this in The New York Times:

“Today is my last day at Goldman Sachs. After almost 12 years at the firm… I can honestly say that THE ENVIRONMENT NOW IS AS TOXIC AND DESTRUCTIVE AS I HAVE EVER SEEN IT. 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…

I no longer have the pride, or the belief… I 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… I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career 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. This view is becoming increasingly unpopular at Goldman Sachs…

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…

I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them… It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I HAVE SEEN FIVE DIFFERENT MANAGING DIRECTORS REFER TO THEIR OWN CLIENTS AS ‘MUPPETS’…

Integrity? It is eroding… will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

These days, the most common question I get from junior analysts about derivatives is, ‘How much money did we make off the client?’… Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about ‘muppets,’ ‘ripping eyeballs out’ and ‘getting paid’ doesn’t exactly turn into a model citizen.”
Greg Smith also said this:

“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.”

Blankfein and Cohn are Jewish, as were Messrs Goldman and Sachs.

Greg Smith is also Jewish.

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