Goldman Sachs chief Lloyd Blankfein ‘disappointed’ by claims of ‘toxic’ greed
Greg Smith, who is resigning today as a Goldman Sachs executive director and head of its US equity derivatives business in Europe, the Middle East and Africa after 12 years, wrote:
“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.”
In a memo to staff, Goldman chief executive Lloyd Blankfein said he was “disappointed to read the assertions… that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm”.
Mr Blankfein wrote that although it was “not shocking that some people could feel disgruntled” in a company of Goldman’s size (it has 30,000 employees) and that the firm is “far from perfect”, he expects staff to “find the words you read today foreign from your own day-to-day experiences”.
In Mr Smith’s article entitled Why I Am Leaving Goldman Sachs he writes that over the past twelve months he had seen five different managing directors refer to their own clients as “muppets”, sometimes over internal e-mail.
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London-based Greg Smith, who was an executive director of its equity derivatives business in Europe, the Middle East and Africa, quit the investment firm after 12 years.
He wrote: “Today is my last day at Goldman Sachs…I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
“… The interests of the client continue to be sidelined in the way the firm operates and thinks about making money…
“…Culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients…it wasn’t just about making money; this alone will not sustain a firm for so long … 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 …
“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. I truly believe that this decline in the firm’s moral fibre represents the single most serious threat to its long-run survival.
“How did we get here? … Today, if you make enough money for the firm (and are not currently an axe murderer) you will be promoted into a position of influence.
“What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients – some of whom are sophisticated, and some of whom aren’t – to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
“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,” sometimes over internal e-mail.
“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.”
Goldman Sachs disagreed with Mr Smith’s comments, saying: “In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.”
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