Goldman Executive Resigns Over “Morally Bankrupt” Culture At Goldman Sachs


Greg Smith, a twelve-year veteran of Goldman Sachs, who had previously appeared on one of Goldman’s recruiting videos, resigned recently. He said he was leaving because the “put-the-client’s-interest-first” culture that had attracted him and held the firm together for 140-plus years had been replaced by a predatory “make-the-firm-money-by-ripping-off-clients” culture. The culture changed as result of a “decline in the firm’s moral fiber.” Smith blamed that decline on CEO Lloyd Blankfein and President Gary Cohn. Smith wrote an article about his departure entitled “Why I am Leaving Goldman” that was published in the New York Times.

Smith walked away from a lot. He was reportedly an executive director and head of Goldman’s U.S. equity derivatives business in Europe, the Middle East and Africa. He said he advised two of the largest hedge funds in the world, five of the largest asset managers in the U.S., three of the most prominent sovereign wealth funds in the Middle East, and his clients have a total asset base of over $1 trillion.

Smith said there are three ways to be a leader now at Goldman: (1) sell clients securities that the firm wants to get rid of; (2) get clients to trade whatever will bring the biggest profit to Goldman; and (3) trade structured products.

At meetings Smith attended, he said there was never any discussion about how to help clients (often referred to as “muppets”) ? only about “how we can make the most possible money off of them.”

“I don’t know of any illegal behavior,” Smith said, “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.”

This culture is perpetuated as “the junior analyst sitting quietly in the corner of the room [hears] about ‘muppets,’ ‘ripping eyeballs out’ and ‘getting paid.'”

Smith’s message to Goldman, and perhaps Wall Street, is pretty simple: “If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.”

According to Smith, the necessary step to turn Goldman Sachs around is this: “Weed out the morally bankrupt people, no matter how much money they make for the firm.”