There is a certain fantasy among workers that on their last day with a company they would be able to write a letter explaining why their bosses are ruining everything. There is the hope that the world will view this letter and think differently about the company and its products henceforth. I wrote such a letter, a particularly strong three page note to the owners of a now defunct pharmacy in Pittsburgh, when I was a freshman in college. I was told my boss never read it. Many others, including some who are reading this, have done the same in the past. Perhaps that is why Greg Smith’s New York Times op-Ed piece/resignation letter, “Why I Am Leaving Goldman Sachs,” caught fire online yesterday. Smith shares the same fantasy of telling off the boss on the last day as many of us, only his position at Goldman Sachs means his resignation letter is New York Times worthy.
Smith, whose many duties included coordinating internship programs, wrote, “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.” Before we write Smith off as someone outside of the loop, I think it should be noted that his now former clients have an asset base of over one trillion dollars. The man who starred in the Goldman Sachs’ recruitment video and began with the firm as an intern in college described the culture at Goldman Sachs as “toxic and destructive as I have ever seen it.”
Below are some highlights from the letter. Smith talks about the culture of the firm and how it has changed since his early days with them:
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…
…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…
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.
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…
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.