I want to share with you Mr. Greg Smith's resignation letter to Goldam Sachs. Is something to be read and then to make our own conlusions.
Till my next post!
Best regards
Prof. Lic. Fernando Julio Silva, MSc.
March 2012
Text:
Why I Am Leaving Goldman
Sachs
By GREG SMITH
Published: March 14, 2012
Op-Ed Contributor
TODAY is my last day at Goldman Sachs. After almost 12
years at the firm — first as a summer intern while at Stanford, then in New
York for 10 years, and now in London — I believe I have worked here long enough
to understand the trajectory of its culture, its people and its identity. And 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. Goldman Sachs is one of the world’s largest and most
important investment banks and it is too integral to global finance to continue
to act this way. The firm has veered so far from the place I joined right out
of college that I can no longer in good conscience say that I identify with
what it stands for.
It might sound surprising to a skeptical public, but
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. The culture was the secret sauce that made this place great and
allowed us to earn our clients’ trust for 143 years. It wasn’t just about making
money; this alone will not sustain a firm for so long. It had something to do
with pride and belief in the organization. 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. I no longer have the pride, or the belief.
But this was not always the case. For more than a
decade I recruited and mentored candidates through our grueling interview
process. I was selected as one of 10 people (out of a firm of more than 30,000)
to appear on our recruiting video, which is played on every college campus we
visit around the world. In 2006 I managed the summer intern program in sales
and trading in New York for the 80 college students who made the cut, out of
the thousands who applied.
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.
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.
Over the course of my career I have had the privilege
of advising two of the largest hedge funds on the planet, five of the largest
asset managers in the United States, and three of the most prominent sovereign
wealth funds in the Middle East and Asia. My clients have a total asset base of
more than a trillion dollars. 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. Another
sign that it was time to leave.
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.
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.
Today, many of these leaders display a Goldman Sachs
culture quotient of exactly zero percent. 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.
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.
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. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl
Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding.
I don’t know of any illegal behavior, but 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.
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.
These days, the most common question I get from junior
analysts about derivatives is, “How much money did we make off the client?” It
bothers me every time I hear it, because it is a clear reflection of what they
are observing from their leaders about the way they should behave. 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.
When I was a first-year analyst I didn’t know where
the bathroom was, or how to tie my shoelaces. I was taught to be concerned with
learning the ropes, finding out what a derivative was, understanding finance,
getting to know our clients and what motivated them, learning how they defined
success and what we could do to help them get there.
My proudest moments in life — getting a full
scholarship to go from South Africa to Stanford University, being selected as a
Rhodes Scholar national finalist, winning a bronze medal for table tennis at
the Maccabiah Games in Israel, known as the Jewish Olympics — have all come
through hard work, with no shortcuts. Goldman Sachs today has become too much
about shortcuts and not enough about achievement. It just doesn’t feel right to
me anymore.
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.
Greg Smith is resigning today as a Goldman Sachs
executive director and head of the firm’s United States equity derivatives
business in Europe, the Middle East and Africa.
A version of this op-ed appeared in print on March 14,
2012, on page A27 of the New York edition with the headline: Why I Am Leaving
Goldman Sachs.
