Goldman Sachs was subject to a devastating attack on the investment bank’s “toxic and destructive” culture in a parting shot from a London executive today.
Greg Smith, who is resigning from his role as head of Goldman's US equity derivatives business in Europe, the Middle East and Africa, warned the board of a "decline in the firm's moral fibre", in a public resignation letter released to the New York Times.
Mr Smith, whose clients have a total asset base of more than a trillion US dollars, and has advised two of the largest hedge funds in the world, said his colleagues “callously” talk of “ripping their clients off”.
The bank, which reported net earnings of $4.4 billion (€3.3 billion) in 2011 and paid its 33,300 staff an average $366,966, said: “We disagree with the views expressed, which we don’t think reflect the way we run our business.”
In his letter, Mr Smith, who has been with the bank for nearly 12 years, said: “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. I can no longer in good conscience say that I identify with what it stands for.”
Mr Smith said when he started at the bank, it “revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients” but there was now “no trace of the culture”.
The executive said he realised it was time to leave the firm when on recruitment drives at college campuses he could “no longer look students in the eye and tell them what a great place this was to work”.
Mr Smith appears to lay some of the blame at the doorstep of current chief executive Lloyd C Blankfein and president Gary D Cohn as he suggests historians will reflect that they “lost hold of the firm’s culture on their watch”.
The executive said if staff make enough money for the firm they will be promoted into a position of influence and Goldman has become “too much about shortcuts and not enough about achievement”.
He also revealed that he has heard five different managing directors refer to their clients in the last year as “muppets”, sometimes over internal email.
“It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are," he said.
“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.”
Goldman took $10 billion from the US Treasury at the height of the financial crisis but has since paid the money back, with taxpayers earning $1.4 billion on the investment.
Despite a 47 per cent plunge in earnings and 26 per cent fall in revenues in 2011, average pay and bonuses per employee has only fallen by 15 per cent.
PA