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Wednesday, Mar 14, 2012, 1:39 pm

Goldman Sachs Exec Says Firm is ‘Toxic’–Are You Surprised?

By Diana Rosen

Goldman Sachs CEO Lloyd Blankfein testifies before a Senate investigative committee on Capitol Hill in April 2010.
(Photo by Jim Watson/AFP/Getty Images)

Goldman Sachs Executive Director Greg Smith left his position with gusto this morning, publishing a 1,300 word Op-Ed in the New York Times titled, “Why I Am Leaving Goldman Sachs.” Smith cited a “toxic and destructive” environment at the firm as his reason for resigning. After working for Goldman Sachs for 12 years, Smith writes, “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.”

In the Op-Ed, Smith claims that Goldman Sachs no longer works in the interests of its clients, but rather in the interest of making as much money as possible for the firm.  Derivatives sales meetings, he says, have devolved to conversations about how best to make money off of clients.  Smith also references five different cases where managing directors referred to their clients as “muppets” via email.  Although Smith says he does not know of any illegal actions on the part of Goldman Sachs, he does know that clients have intentionally been given bad counseling on their investments, leading to profits for the firm. 

Smith played a large role in recruiting college students for the firm, and it was his work in recruitment that led to his decision to quit. “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,” he wrote.

Smith ended his resignation letter with a word of warning to Goldman Sachs:

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.

Goldman Sachs CEO Lloyd Blankfein and President Gary Cohn responded immediately, issuing a letter to their employees.  The letter countered Smith’s claim that Goldman Sachs suffers from moral bankruptcy by referring to its “client-driven culture” and citing statistics from the firm’s People Survey showing client satisfaction.  Blankfein and Cohn claim that Smith’s letter has wildly misrepresented the firm:

In a company of our size, it is not shocking that some people could feel disgruntled. But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion. But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments.

The takedown has sent tremors through the business world and blogosphere--but some commentators are pushing back against the notion that there is anything surprising about Goldman Sachs not being as "client-driven" as it claims.

The satirical British website The Daily Mash posted a parody of the letter titled “Why I Am Leaving the Empire, by Darth Vader.” American comedian Andy Borowitz also published a fake letter of response from Blankfein in which he announces that Ugandan war criminal Joseph Kony will be taking Smith’s place at Goldman Sachs. 

Diana Rosen is a winter/spring 2012 In These Times editorial intern.

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