Thursday, March 15, 2012

Of Muppets and Golden Geese

"You hold it by the neck like this ..."
From the Tell Us Something We Didn't Know Dept. (by Greg Smith, [now former] Executive Director of Goldman Sach's U.S. Equity Derivatives business in Europe, the Middle East and Africa, via The New York Times):  "Why I am leaving Goldman Sachs. Today is my last day at Goldman Sachs. After almost 12 years at the firm - in New York, and now in London - 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 ... When the history books are written, they may reflect that the current CEO, 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. ... Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted ... What are three quick ways to become a leader? a) ... persuading your clients to invest in the stocks or other products that we are trying to get rid of ... b) ... get your clients ... to trade whatever will bring the biggest profit to Goldman. ... c) ... trade any illiquid, opaque product with a three-letter acronym. ... 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,” ... 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 ones most directly aligned with the client’s goals? Absolutely. Every day, in fact."  Ouch!  Goldman Sucks shares may seem a good investment, after all - they make money.  But that will end if its clients feel screwed and head for the hills.  Fewer muppets means fewer muppets to screw.  GS share value dropped by $2.2B after the above was published.  No business can flourish unless customer service and confidence is paramount.  That is exactly why integrity in business matters.  It's a lesson not only for the Young Turks of Wall Street, but also for the Blankfeins and Cohns of the world who are so insulated from reality by the outrageous greed they harbour that they are destroying the goose that laid the golden egg.  Or was that the Goldman that laid this goose egg?  As for Vampire Squid employees: watch out folks, here come the new, stricter confidentiality clauses to be signed and appended retroactively to your employment contracts!