Burning up Wall Street and the virtual Wall Street that is Twitter and Facebook, not to mention inspiring wags such as the UK's Daily Mash (above) and US humorist Andy Borowitz — you've no doubt already read Goldman Sachs' exec Greg Smith’s excoriating resignation letter published as a take-no-prisoners op-ed column in The New York Times today. Goldman, no surprising, rejected Smith's accusations in the 'other' paper of record, the Wall Street Journal.
Goldman's response to the WSJ: “We disagree with the views expressed, which we don’t think reflect the way we run our business,” a Goldman spokeswoman said. “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.”
Disgruntled and bitter as he is, Smith's complaints merit all the attention for asking important questions that other financial services firms should be asking themselves, and roundly critiquing the Wall Street ethos post-financial crisis.
The London-based executive director, who handled equity derivatives in Europe, the Middle East and Africa for Goldman, sees the firm today as virtually unrecognizable from the company he joined 12 years ago. At the core of his Jerry Maguiresque letter is a scathing attack on his now former employer's leadership, ethics, and respect for the client — or "muppet," as Smith alleges some Goldman staffers call their clients.
“Not one single minute is spent asking questions about how we can help clients," Smith wrote. "It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.”
Other excerpts from this takedown include:
“I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
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 fiber represents the single most serious threat to its long-run survival.
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.
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.
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.”
BBC Business editor Robert Preston tweeted: "This attack on Goldman Sachs from resigning exec is astonishing. The damage to the firm could be pretty serious."
"These complaints, of course, are the same charges that have been lobbed at Goldman for years, particularly since the economic meltdown in 2008. To hear them now, from a former true believer - Smith started at the firm as intern 12 years ago, and has been there ever since graduating from Stanford - makes them particularly damning," The Atlantic blogged.
Josh Brown commented on his Reformed Broker blog that Smith’s "screed" misses the fact that “the ‘culture’ of Goldman Sachs was, is and always will be about making money, often at the expense of a client.”
Business Insider said "this seems sure to be the buzzy Wall Street story of the day…[it's] also sure to be another PR nightmare for Goldman Sachs."
The Wall Street Journal's economics editor, David Wessel, tweeted: "Goldman's new p.r. man, Jake Siewart, is going to get baptism by fire today."
The FT biz blog's take: “Blankfein and his brand new head of communications cannot simply shrug this off. A strong culture – like a strong reputation – takes years to build, but can disintegrate rapidly. The company’s initial statement makes clear it thinks there is no problem: We disagree with the views expressed, which we don’t think reflect the way we run our business. 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.”
As the New York Times own article on Smith's op-ed (Title: "A Public Exit from Goldman Sachs Hits at a Wounded Wall Street") states, “To be sure, longtime bankers say it is not like short-term greed was absent in the past. It has been around since traders gathered under a buttonwood tree and founded the New York Stock Exchange in 1792. But the astounding size of Wall Street’s biggest firms — and the fortunes to be made — have altered the calculus.”
Smith admonishment to his former employer applies to pretty much any company, and just on Wall Street: “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.” Internal brand engagement, making sure the corporate brand mission aligns with the business, putting the customer first, promoting ethical practices — all common sense, yet sometimes overlooked in the rush to turn a quarterly profit.
As for Smith, his personal brand has certainly been established. Will he write a book, do the talkshow circuit, get hired as a cable news commentator — or launch an ethical hedge fund? We also expect the Muppets to issue a response — Miss Piggy must be in high dudgeon today.