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Why Leaving Goldman Sachs Breaks the Rules of the Game

Defector Greg Smith has been called dishonest, unprofessional, and self-serving. But what might he be telling us about how to do business responsibly?
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Photo by Dimitri.

In his transformative 1978 essay, "The Power of the Powerless," Czech dissident Václav Havel explains how one person “living in truth” can shine a light on unspoken questions, revealing the automatism of our usual assumptions: “When a single person breaks the rules of the game, thus exposing it as a game—everything suddenly appears in another light.”

With his March 14 New York Times op-ed, "Why I Am Leaving Goldman Sachs," now former Executive Director Greg Smith broke many rules of the game. He has been called unprofessional. Sanctimonious. Dishonest. Self-serving. Disgruntled. Naïve.

Public moral acts are always disruptive, and defectors of any type are likely to be labeled as malcontents.

Like any defector, Greg Smith was disloyal.  He aired dirty laundry, describing how Goldman Sachs had lost the client focus that once defined its culture. “It makes me ill how callously people talk about ripping their clients off,” he said. Why would he so publicly denounce his employer? And after twelve years? He must, detractors speculate, not have been happy with his bonus. He must have been bypassed for promotion.  He must be planning to write a book.

All of this is possible.

But sometimes people are more motivated by their values than we assume.

Every day, people do outrageously responsible things. Linda Almonte is risking personal financial ruin to ensure JP Morgan Chase’s robo-signing practices and inaccurate recordkeeping don’t send its clients into debt-collection hell.  As Reinhold Niebuhr explains in Moral Man and Immoral Society, public moral acts are always disruptive, and defectors of any type are likely to be labeled as malcontents.

So while we are understandably skeptical, we need to consider that Smith might just be calling it as he sees it. And if so, what might his truth-telling be telling us?

From this distance, his action seems to be one of conscience. Insiders have said Smith is now virtually unemployable. And despite claims that he must have socked away millions, we know nothing about his finances; nor if he passed up a package that would have required his silence. He is likely to face isolation and family stress. But most significantly, he recognized an unhealthy compromise and took action to stop it. This is surprisingly difficult for human beings to do.

Creating real value is not the purview of a few poorly paid nonprofit directors, but the work of all responsible adults.

The most important aspect of Smith’s defection is not the questions it raises about Goldman—though clearly we must consider how markets or democracy can possibly function when distorted by concentrated regulatory influence and market power. Even free-market purist Milton Friedman conceded that the pursuit of profit needs to happen “within the rules of the game.”

The most important aspect of Smith’s post is that it reveals at least two worldviews within the culture of business. The first view is represented by Bloomberg’s response, “Yes, Mr. Smith,Goldman Sachs is All about Making Money.” Of course Goldman rips its clients off: “It is not charity work,” say the editors.

This can be a dangerous perspective—for business and the world.

Serving customers is not altruism. A desire to collaborate in an environment of teamwork and humility is not “soft.” Creating real value, as espoused by a second worldview, is not the purview of a few poorly paid nonprofit directors, but the work of all responsible adults.

The strongest finding in my research on workplace compromise is that the vast majority of business people want to be good guys. Contrary to widespread attributions of blind greed, most professionals actively seek out employers they can believe in—which means companies that fulfill commitments to clients, employees, and society.

From the perspective of this second worldview, Smith’s editorial raises some critical questions for business professionals and reformers alike:

How do we distinguish “good profits” from “bad profits”?
This story is not really about making money versus serving clients but about two different ways of making money. One the one hand, businesses can earn “good profits” derived from delivering value to customers and meeting obligations to other stakeholders. Or, they can pursue “bad profits” derived from destroying relationships and other valuable assets. The problem with bad profits is they reduce the firm’s future profits (and, potentially, prey on its societal obligations). When a company doesn’t distinguish between good profits and bad profits, it ends up rewarding the executives who take the most shortcuts, not those who create the most value.

Societies evolve when those enjoying the greatest rewards question what makes those rewards legitimate—and stop pressing for advantages that seem predatory or hypocritical.

What does it mean for a business to make a commitment?
Everyone is debating whether Goldman has an obligation to advance its clients’ interests since it is a for-profit corporation. But this ignores the fact that Goldman may have voluntarily taken on additional obligations.

For example, companies routinely make brand promises and other commitments in order to win customers, attract investors, and recruit talent. Consider InterfaceFLOR’s commitment to zero adverse impact on the environment by 2020 and how that influences willingness to do business with them. Similarly, Goldman Sachs has committed to a set of Business Principles, the first of which says, “Our clients’ interests always come first.” Such a promise may have influenced Greg Smith in joining the firm, or helped in his recruiting efforts. Having made such a commitment, is Goldman obligated to keep it?

What do responsible business people do when market incentives are distorted?
Most professionals who hold this second worldview believe that, in the long run, the greatest financial rewards go to whoever creates the most value. Unfortunately, when regulations are distorted or monopoly power comes into play, businesses can be rewarded for actions that do not add value for customers or other stakeholders. For example, by convincing regulators to drastically reduce banking oversight, Goldman and other banks helped create incentives for banks to take irresponsible risks, for which society ultimately bore the cost. When market incentives are distorted, pursuing “bad profits” actually pays off.  Unfortunately, many responsible business professionals are not yet aware of the distortions caused by regulatory influence, especially given that corporations are considered legal persons and have a significant and growing impact on democratic processes.

money face by Bart
How to Find Meaning and
Money In Your Work

Millions of us are resigning ourselves to work that hurts us, hurts others, and damages the planet. We’re wasting our greatest assets.

Ultimately, Smith’s piece is about the right to have our work create real value in the world—not just that which is counted in overly simplistic definitions of profit. It's about how to create real wealth, rather than phantom wealth.

As Neibuhr explained, societies evolve when those enjoying the greatest rewards question what makes those rewards legitimate—and stop pressing for advantages that seem predatory or hypocritical.

Smith’s piece raises questions for everyone. It asks us to challenge the assumption that we must make millions before doing work we believe in. Like Smith, we need to know at what point to say, “I didn’t sign up for this,” and find another way to make our living. It challenges us to help keep our company’s commitments real, perhaps by asking at the next meeting, “What are this client’s real goals?” And as citizens, it asks us to consider the regulatory structures, democratic reforms, and enforcement efforts needed to ensure that creating real value is rewarded.

At any moment, Havel wrote, any of us can be struck by the force of the truth. Change is first a question of confidence—in ourselves, in each other, and in the world.


Elizabeth Doty wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Elizabeth is the author of The Compromise Trap:  How to Thrive at Work Without Selling Your Soul, which teaches leaders ways of reversing unhealthy workplace pressure. Her firm, WorkLore, helps organizations such as Cisco, Sungevity, and Stanford University build cultures of inspiration, commitment and action that lead to real value. 

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