Expert Perspective by Grahall’s OmniMedia Editorial Board
The May 7, 2010 article for the Huffington Post by Anne D’Innocenzio (Goldman Sachs To Create Internal ‘Business Standards Committee’) caught the attention of our Editorial Board. Ms. D’Innocenzio writes: “Goldman Sachs’ embattled Chairman and CEO Lloyd Blankfein told investors Friday that the firm is creating a business standards committee to study the bank’s practices in the wake of the civil fraud suit launched by the Securities and Exchange Commission and the criminal probe opened by the Justice Department… Goldman’s power during the financial crisis and the prominence of many former Goldman executives have made the firm a lightning-rod for public outcry over Wall Street’s greed and risky behavior.”
While there are many in the media, the government and the public who eagerly jump on the “bashing Goldman bandwagon,” we want to look at this from a different perspective, from the top down.
First starting way up at the top, Goldman’s announcement appears to be a direct response to political pressure rather than a business response to market pressure. For many financial services firms and for Goldman in particular, government policy and public outcry have influenced stock prices, putting the CEO and management in the awkward position of addressing forces that may not have been anticipated as part of their business strategy.
Second, some might ask” “Where was Goldman’s leadership?” The term “leadership” is most often used to mean something positive, even inspirational. But, from our perspective, leadership comes in all shapes and sizes and has a direct impact on the culture of the organization it leads. Ineffective leaders create ineffective organizations, malevolent leaders create malevolent organizations. If we demand positive outcomes, we require positive leadership. Employees of Goldman Sachs were under the umbrella of a leadership that said, explicitly or implicitly, that their behaviors were acceptable. And in some cases those behaviors were highly rewarded.
Clearly, Goldman Sachs has a very strong culture, maybe second only to that of the US Marine Corps. With a culture that has been so successful over the long run, adjusting to the new reality of being under the “microscope of blame” rather than under the glow of adulation will be challenging. A business standards committee sounds great, but what can they expect to accomplish? Well, at the least we hope they take a close look at the message that compensation and rewards programs are sending about expected and acceptable behaviors.
As we said in our blog “It’s Complicated”: “Today, politics not economics drives the discussion and the decisions around executive pay. Our government cannot legislate greed and stupidity out of existence, but it can serve as a referee to keep the playing field level. America’s reputation as a fair and safe place to do business is critical to our economic future.”
Goldman and any other organization that is purposefully or not, supporting bad behaviors, needs an indisputable motivation to change. Perhaps that will come from reputation risk, perhaps from regulatory pressures, perhaps from transformations to their compensation and rewards program. But most likely the motivation to change behaviors that have for so long been successful and deeply instilled will need to come from all of those and more. If that doesn’t work, perhaps it’s time for a 12 Step program, but that would require that Goldman first admit that they have a problem.
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