DOES CULTURE MATTER IN MANAGEMENT CONTROL? A GOLDMAN SACHS EMPLOYEE RESIGNS PUBLICALLY “Employees Management believes that a major strength and chief ground for the success of Goldman Sachs is the quality and dedication of our people and the s hared sense of being portion of a squad. We strive to keep a work environment T hat fosters professionalism. excellence. diverseness. cooperation among our employees worldwide and high criterions of concern moralss. Instilling the Goldman Sachs civilization in all employees is a uninterrupted procedure. in which T raining plays an of import portion. All employees are offered the chance to take part in instruction and periodic seminars that we sponsor at assorted locations throughout the universe. Another of import portion of transfusing the Goldman Sachs civilization is our employee reappraisal procedure. Employees are reviewed by supervisors. colleagues and employees they supervise in a 360degree reappraisal procedure that is built-in to our squad attack. and includes an e rating of an employee’s public presentation with regard to put on the line direction. conformity and diverseness.
As of December 2011. we had 33. 300 entire staff. excepting staff at amalgamate entities held for investing intents. ” [ Beginning: 2011 10K of The Goldman Sachs Group. Inc. . pp. 6-7 ; published online February 28. 2012 ] EXCERPT FROM: “Goldman Sachs’ Response to March 14. 2012 New York Times Op-Ed The followers is the message Lloyd C. Blankfein and Gary D. Cohn sent March 14. 2012 to the people of Goldman Sachs. By now. many of you have read the entry in today’s New York Times by a former employee of the house. Needless to state. we were disappointed to read the averments made by this person that do non reflect our values. our civilization and how the huge bulk of people at Goldman Sachs think about the house and the work it does on behalf of our clients. ” [ Beginning: hypertext transfer protocol: //www. goldmansachs. com/media-relations/comments-and-responses/current/nyt-oped-response. hypertext markup language ; accessed March 14. 2012 ]
Excerpt FROM: March 14. 2012 Why I Am Leaving Goldman Sachs By GREG SMITH TODAY is my last twenty-four hours at Goldman Sachs. After about 12 old ages at the house — foremost as a summer houseman while at Stanford. so in New York for 10 old ages. and now in London — I believe I have worked here long plenty to understand the flight of its civilization. its people and its individuality. And I can candidly state that the environment now is as toxic and destructive as I have of all time seen it… [ SOURCE: A version of the op-ed from which this extract was taken appeared in print on March 14. 2012. on page A27 of the New York edition of the New York Times ]
Introduction On March 14. 2012. Greg Smith stunned the concern community by publicly explicating his surrender from Goldman Sachs in an op-ed piece published in the New York Times. [ Mr. Smith’s full article is in Appendix 1 of this instance ] . The reaction was fleet and varied. runing from understanding and support to straight-out ill will. Some immediate reactions were offered by readers of Mr. Smith’s article who uploaded remarks to the New York Times website: for a sampling of these on-line remarks. see Appendix 2. Lloyd C. Blankfein ( Goldman Sach’s Chairman and Chief Executive Officer ) and Gary D. Cohn ( President and Chief Operating Officer ) rapidly responded on the same twenty-four hours that Mr. Smith’s surrender was published. by let go ofing a message “to the people of Goldman Sachs” ( see Appendix 3 ) . GOLDMAN SACHS GROUP. INC. Harmonizing to page 1 of its 2011 10K study. Goldman Sachs Group. Inc “is a taking planetary investing banking. securities and investing direction house t hat provides a broad scope of fiscal services to a significant and diversified client base that includes corporations. fiscal establishments. authoritiess and high-net-worth persons. ” The company reports its activities in f our concern sections: Investing Banking. Institutional Client Services. Investing & A ; Lending and Investment Management. The chart below nowadayss the four concern sections:
The tabular array below nowadayss Goldman Sach’s recent operating consequences. by section:[ See pages 2 – 5 of the company’s 10K study for 2011 for more information on its concern sections ] REACTION TO MR. SMITH’S PUBLIC RESIGNATION In add-on to the immediate reactions of readers of the New York Times ( Appendix 2 ) . Mr. Smith’s article stimulated legion responses in a broad assortment of media.
QUESTIONS 1. Is this a instance of whistleblowing? Explain. Should a formal mechanism for whistleblowing be portion of a direction control system? 2. What is corporate civilization? Is it different from organisational civilization? 3. Review Goldman Sachs 2012 Proxy papers ( which reports on 2011 ) . including the Cadmium & A ; A. Do you have any remarks? 4. Are “culture” and “management control” related? Explain. Is “ethics” involved? Explain. 5. Describe Goldman Sachs civilization. 6. Review Goldman Sachs 2011 MD & A ; A. audited fiscal statements. and CEO missive to stockholders. Does your reply to Question 5 alteration?
7. Suggest. with grounds. how the state of affairs could be improved. if it needs to be improved. 8. Is Mr. Smith stating the truth? What might hold motivated him? SUGGESTED ADDITIONAL READING -Flamholtz. E. ( 1996 ) . “Effective Organizational Control: A Framework. Applications. and Implications” . European Management Journal. Vol. 14. No. 6. pp. 596-611. -Malmi. T. and Brown. D. ( 2008 ) . “Management Control Systems as a Package—Opportunities. Challenges and Research Directions. ” Management Accounting Research. 19 ( 4 ) . pp. 287-300. -Jubb. P. B. . ( 1999 ) . ‘Whistleblowing: A Restrictive De?nition and Interpretation’ . Journal of Business Ethics. 21 ( 1 ) . 77–94. -See the undermentioned Canadian position: Tim Kiladze. “Opinion: Why I gave up my six-figure salary and quit Bay Street” . from Saturday’s Globe and Mail. Posted on Friday. March 16. 2012 7:00PM EDT ; FROM: hypertext transfer protocol: //www. theglobeandmail. com/globe-investor/investment-ideas/streetwise/why-i-gave-up-my-sixfigure-salary-and-quit-bay-street/article2372106/singlepage/ # articlecontent
MR. SMITH’S RESIGNATION ARTICLE March 14. 2012. on page A27 of the New York edition of the New York Times FROM: hypertext transfer protocol: //www. nytimes. com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs. hypertext markup language? pagewanted=all
Why I Am Leaving Goldman Sachs
By GREG SMITH Published: March 14. 2012
Today is my last twenty-four hours at Goldman Sachs. After about 12 old ages at the house — foremost as a summer houseman while at Stanford. so in New York for 10 old ages. and now in London — I believe I have worked here long plenty to understand the flight of its civilization. its people and its individuality. And I can candidly state that the environment now is as toxic and destructive as I have of all time seen it. To set the job in the simplest footings. the involvements of the client continue to be sidelined in the manner the house operates and thinks about doing money. Goldman Sachs is one of the world’s largest and most of import investing Bankss and it is excessively built-in to planetary finance to go on to move this manner. The house has veered so far from the topographic point I joined right out of college that I can no longer in good scruples say that I identify with what it stands for. It might sound surprising to a disbelieving populace. but civilization was ever a critical portion of Goldman Sachs’s success. It revolved around teamwork. unity. a spirit of humbleness. and ever making right by our clients. The civilization was the secret sauce that made this topographic point great and allowed us to gain our clients’ trust for 143 old ages.
It wasn’t merely about doing money ; this entirely will non prolong a house for so long. It had something to make with pride and belief in the organisation. I am sad to state that I look around today and see virtually no hint of the civilization that made me love working for this house for many old ages. I no longer have the pride. or the belief. But this was non ever the instance. For more than a decennary I recruited and mentored campaigners through our grueling interview procedure. I was selected as one of 10 people ( out of a house of more than 30. 000 ) to look on our recruiting picture. which is played on every college campus we visit around the universe. In 2006 I managed the summer intern plan in gross revenues and trading in New York for the 80 college pupils who made the cut. out of the 1000s who applied. I knew it was clip to go forth when I realized I could no longer look pupils in the oculus and state them what a great topographic point this was to work. When the history books are written about Goldman Sachs. they may reflect that the current main executive officer. Lloyd C. Blankfein. and the president. Gary D. Cohn. lost clasp of the firm’s civilization on their ticker.
I genuinely believe that this diminution in the firm’s moral fibre represents the individual most serious menace to its long-term endurance. Over the class of my calling I have had the privilege of reding two of the largest hedge financess on the planet. five of the largest plus directors in the United States. and three of the most outstanding crowned head wealth financess in the Middle East and Asia. My clients have a entire plus base of more than a trillion dollars. I have ever taken a batch of pride in reding my clients to make what I believe is right for them. even if it means less money for the house. This position is going progressively unpopular at Goldman Sachs. Another mark that it was clip to go forth. How did we acquire here? The house changed the manner it thought approximately leading. Leadership used to be about thoughts. puting an illustration and making the right thing. Today. if you make adequate money for the house ( and are non presently an ax liquidator ) you will be promoted into a place of influence. What are three speedy ways to go a leader? a ) Execute on the firm’s “axes. ” which is Goldman-speak for carrying your clients to put in the stocks or other merchandises that we are seeking to acquire rid of because they are non seen as holding a batch of possible net income. B ) “Hunt Elephants. ” In English: acquire your clients — some of whom are sophisticated. and some of whom aren’t — to merchandise whatever will convey the biggest net income to Goldman.
Name me antique. but I don’t like selling my clients a merchandise that is incorrect for them. degree Celsius ) Find yourself sitting in a place where your occupation is to merchandise any illiquid. opaque merchandise with a three-letter acronym. Today. many of these leaders display a Goldman Sachs civilization quotient of precisely zero per centum. I attend derived functions gross revenues meetings where non one individual minute is spent inquiring inquiries about how we can assist clients. It’s strictly about how we can do the most possible money off of them. If you were an foreigner from Mars and sat in on one of these meetings. you would believe that a client’s success or advancement was non portion of the thought procedure at all. It makes me ill how unfeelingly people talk about rending their clients off. Over the last 12 months I have seen five different pull offing managers refer to their ain clients as “muppets. ” sometimes over internal electronic mail.
Even after the S. E. C. . Fabulous Fab. Abacus. God’s work. Carl Levin. Vampire Squids? No humbleness? I mean. come on. Integrity? It is gnawing. I don’t know of any illegal behaviour. but will people force the envelope and pitch lucrative and complicated merchandises to clients even if they are non the simplest investings or the 1s most straight aligned with the client’s ends? Absolutely. Every twenty-four hours. in fact. It astounds me how small senior direction gets a basic truth: If clients don’t trust you they will finally halt making concern with you. It doesn’t matter how smart you are. These yearss. the most common inquiry I get from junior analysts about derived functions is. “How much money did we do off the client? ” It fusss me every clip I hear it. because it is a clear contemplation of what they are detecting from their leaders about the manner they should act. Now project 10 old ages into the hereafter: You don’t hold to be a projectile scientist to calculate out that the junior analyst sitting softly in the corner of the room hearing about “muppets. ” “ripping orbs out” and “getting paid” doesn’t precisely turn into a theoretical account citizen. When I was a freshman analyst I didn’t cognize where the bathroom was. or how to bind my shoe laces. I was taught to be concerned with larning the ropes. happening out what a derived function was. understanding finance. acquiring to cognize our clients and what motivated them. larning how they defined success and what we could make to assist them acquire at that place.
My proudest minutes in life — acquiring a full scholarship to travel from South Africa to Stanford University. being selected as a Rhodes Scholar national finalist. winning a bronze decoration for table tennis at the Maccabiah Games in Israel. known as the Judaic Olympics — have all come through difficult work. with no cutoffs. Goldman Sachs today has become excessively much about cutoffs and non plenty about accomplishment. It merely doesn’t feel right to me any longer. I hope this can be a wake-up call to the board of managers. Make the client the focal point of your concern once more. Without clients you will non do money. In fact. you will non be. Weed out the morally belly-up people. no affair how much money they make for the house. And acquire the civilization right once more. so people want to work here for the right grounds. Peoples who care merely about doing money will non prolong this house — or the trust of its clients — for really much longer. Greg Smith is vacating today as a Goldman Sachs executive manager and caput of the firm’s United States equity derived functions concern in Europe. the Middle East and Africa.
Readers’ Comments Readers shared their ideas on this article. ?I find that these testimonies are of import to assist alter the corrupt and rotten fiscal civilization that surrounds our society. The sad portion is that a company like Goldman Sachs has far excessively much power and controls non merely the wealth of the wealthier. but besides the wealth of independent states. After the 2008 prostration. independent States all over the universe have injected immense sums of revenue enhancement payers’ money to cover for the blatant errors and greed of Goldman Sachs ( and others ) . Now the people of the more vulnerable States. which small industrial and productive power. are being sacrificed so that this spiral of madness can go on.
As a citizen of one of these states that is being sacrificed – Portugal – I demand that my elective leaders stop featherbeding for these moonstruck companies like Goldman Sachs and halt imposing rough asceticism steps that will take us nowhere and will merely destruct the societal cloth of our state. However. I fear that this will non go on. because as we saw in Italy and Greece. when elective leaders stop collaborating with these powers they are merely replaced by former Goldman Sachs executives…sad universe we are populating in. March 14. 2012 at 10:07 a. m. ?A moral determination is to be commended irrespective of circumstance ; coming of age in a civilization that prizes the devising of money to the exclusion of everything else makes making such a determination double hard. Mr Smith is to be congratulated for his personal disclosure.
However. the endurance of the company pales next to the slow-motion pandemonium into which this behaviour – by no agencies confined to GS – plunges the existent universe on a regular footing. Of class it’s really clear that those responsible are non the least spot interested. for grounds mentioned in the article. If Mr Smith is interested in uncluttering his scruples. he might see working to progress existent ordinance of the industry – at the really least. March 14. 2012 at 10:01 a. m. ?Wow! ……I’m impressed. I hope ……Mr. Smith Goes to Washington! ! ! How bracing to read your remarks. There are other companies / infirmaries that should analyze the internal civilizations they have created. The state is easy traveling down the tubing because there is a degree of corruptness that is going the recognized norm across the board. If things are non changed now? When! March 14. 2012 at 10:00 a. m. ?Thank you. Greg for talking out. I have been a Goldman client since 2006. and have been seeking to acquire my money out for several old ages now. to no help. My money was placed in proprietary financess that have under-performed other similar investings and were clearly designed to maximise Goldman’s net income at my disbursal.
I am non allowed to acquire money out of these investings. in some instances for up to 810 old ages. without a important “haircut” ( hmmm. I wonder if Goldman spouses net income from the haircut? ? ) . In one of these investings ( which has lost 35 % of its value since 2008 ) . Goldman even refuses to supply basic information. like estimations of income or disbursals for revenue enhancement planning intents. I literally have to think the income my K-1 will demo when I file my revenue enhancements in April. because Goldman won’t even give me an estimation ( much less quarterly or one-year commentary or revelation by the fund directors ) . In many old ages. the fund shows significant involvement income ( on which I have to pay revenue enhancements ) . but none of that income is of all time distributed to me and the NAV of the fund at the same time goes down. Where did the income travel? When asked. Goldman refuses to supply particulars ( even though I am a limited spouse of the investing partnership and have a right to this information ) . It is astonishing how small Goldman cares about its clients.
Goldman exists for the exclusive intent of enriching its spouses. March 14. 2012 at 10:00 a. m. ?Congratulations. Greg! I resigned from more than one company where unity was earnestly missing. In my first place. I was ordered to assist clients lie on fiscal statements and alteration bills – the spouse really handed me a bottle of white out! I was ordered to be a portion of concealing a pension deficit that I discovered and was walked out for declining to travel along. I have paid a monetary value for walking off from these ‘great opportunities’ . but I sleep good at dark. You are courageous to take a base for your clients and for your ain unity. I applaud you for walking off and for talking out. March 14. 2012 at 9:59 a. m.
I guess when you are portion of the authorities with the keys to the treasury……you can make whatever you want. The lone manner of halting them is the same manner to alter our bloated and useless authorities: The Fat Cats have the lone voice and will hold to consequence any alteration March 14. 2012 at 9:46 a. m. ?The paradigm displacement of which you write is non alone to Goldman Sachs. Wall Street. or even the concern community at big. It has infiltrated about every aspect of economic activity in the state. Politicss and medicate instantly come to mind. As a civilization. we have skidded off our moral base. March 14. 2012 at 9:46 a. m. ?Unfortunately my factory-working friends who took such a large hit in this latest recession don’t read the NY Times. If they saw Smith’s article they might so get down to see that it wasn’t large authorities shortages that brought down the economic system but this Wall Street “take the money and run” outlook. It’s the manner American CEOs run our corporations and it is this outlook that destroys morale all the manner down to the mill floor. March 14. 2012 at 9:46 a. m. ?Greg Smith You sound like one of the bland saps who has supported Obama over the last 3 old ages.
You believe the ballyhoo and feel-good rhetoric as a immature pie in the sky college grad. so happen that everything isn’t as you thought. Not merely are you delinquent in your ain moral standing. but so you lash out at the manus that feeds you. Would you hold quit Goldman if you were merely a 3rd twelvemonth analyst. or did you wait to vacate after your were a Pull offing Director with 1000000s in stock and options. Your manus contorting about themoral fibre and civilization is hyocritical. as you were portion and package of that civilization —and you are a fraud… . . merely like the flunkies who believe in Obama. the worst president since Herbert Hoover March 14. 2012 at 9:46 a. m. ?Greg. your ailments are the same ailments that were around 12 old ages ago. 25 old ages ago heck 35 old ages ago. non to advert but since the beginning of banking! Nothing incorrect with doing money on clients for services.
Something incorrect when you come from a deficiency of sound shared values. Sounds like the tipping point was reached for you… and I am thinking you thought you and your values could last GS altering environment and stayed manner excessively long. With a trillion in assets you can do a life as an independent with no job even if you captured 10 % of them. But what would truly do a difference is if YOu went to SIngularity University and worked with a clump of 20 somethings on a new paradigm for money. finance and banking that is value based. That would do a difference. Leaving GS to their frailties merely lets them survive thirster. Make something! March 14. 2012 at 9:46 a. m.
Praises. Mr. Smith. and best wants in your hereafter enterprises. It is reviewing to see person in your place who is willing to walk every bit good as talk. It is besides non mundane I get to read a surrender missive and forenoon wakeup call printed for the full circulation of the NYT and which is besides likely giving more than a few of your former co-workers a well-deserved fit. Too many believe that chase of money is an terminal in itself. Now. more than of all time. whether in political relations. concern or elsewhere. personal unity should and does affair. March 14. 2012 at 9:46 a. m. ?The job is that they don’t CARE if they destroy the company. every bit long as they make a batch of short term net incomes on the manner at that place. That attitude is non merely destructing Goldman Sachs. it’s destructing the full market place. Net income Motive Uber Alles. The consequence is that a few people make a batch of money. and quality and invention cease to be. That’s why the United States of America no longer leads the universe in anything at all. But a few of us have a whole batch of money. and that’s more of import. March 14. 2012 at 9:46 a. m.
Greg. where are you traveling following. and how do I acquire you to pull off my histories? March 14. 2012 at 9:46 a. m. ?The job is that they don’t CARE if they destroy the company. every bit long as they make a batch of short term net incomes on the manner at that place. That attitude is non merely destructing Goldman Sachs. it’s destructing the full market place. Net income Motive Uber Alles. The consequence is that a few people make a batch of money. and quality and invention cease to be. That’s why the United States of America no longer leads the universe in anything at all. But a few of us have a whole batch of money. and that’s more of import. March 14. 2012 at 9:46 a. m. ?Chapeau tres Ba! No usage to maintain pecking about ‘what if’ on scenario planning in the yesteryear. It’s ne’er excessively late to go who you want to be and that is what you did. are making and most likely will be making in the hereafter. For that you get my regards and regard. The universe needs more people like you who have overcome fright and remain close to themselves and their values! Thankss 4 that. Greeting from Holland where the tulips are about ready for stating hulloMarch 14. 2012 at 9:46 a. m. ?I wish Greg Smith good. It takes bravery to make what he has done.
After passing several old ages educating myself as to the causes and perpetrators of the Great Recession of 2008 I have no uncertainty that his cardinal return on today’s civilization at Goldman ( and the remainder of Wall Street ) is right. Once investing banking went from being funded by partnerships ( 1970’s? ) to offering stock and one time the reguations dividing Bankss from investing Bankss were eliminated and one time the SEC became awkward and corrupt. the enviornment and civilization of Bankss and Wall Street bit by bit changed to what it is today: ill regulated and filled with unrepentent searchers of enhanced net incomes utilizing irresponsible degrees of purchase ( 25 to1 & A ; up ) and hazardous fiscal vehicles. unrepentent purchasers of congressional support utilizing K Street lobbyists — and the designers of the following global fiscal meltdown before the terminal of this decennary. Who would hold of all time thought that seting hard currency under the mattress might be an acceptible constituent of the mean man’s portfolio! March 14. 2012 at 9:46 a. m. ?Job Opening: Goldman Sachs executive manager and caput of United States equity derived functions concern in Europe. the Middle East and Africa.
Don’t bother using – one of the “Elephant Hunter” already got the occupation. March 14. 2012 at 9:46 a. m. ?Sadly. Greg. the board-rooms today are where the jobs start ( erectile dysfunction ) – in a few more old ages. you will recognize a fish putrefactions from the caput down. and that the hapless corporate administration by fictile boards is what allows the thriving of a civilization you bemoan. For this ground. and because every house will prosecute in whatever their rivals are making to do a vaulting horse. regulators are needed. and bright ruddy lines. And you’re right. there are excessively many man-made trades in finance. with the most illiquid and most arcane being the most prized. since they can be marked-to-model alternatively of marked-to-market if an nonsubjective carnival value could be determined ; makes it much easier to run into those public presentation ends and acquire that fillip. you know. Good fortune! March 14. 2012 at 9:46 a. m. ?Now comes damage control. as GS attempts to destruct the courier. March 14. 2012 at 9:46 a. m. ?This article is low on substance.
In stating us that GS is ruthlessly profit-driven. we’re non larning anything new. If the house truly has changed over the last 10 old ages. I’d like to hear specific inside informations about why this happened. Alternatively. the writer spends most of the article speaking about himself. his achievements in concern and elsewhere. and his committedness to his clients. It feels like he is utilizing the NYT to direct out a sketch to the universe. already looking in front to the following stage of his calling. March 14. 2012 at 9:46 a. m. ?Liked your piece. but I agree with Paul from Hartford: talk is inexpensive. Write back when you’ve returned some of your fillip money to clients or donated important amounts to the cash-starved PUBLIC university system of California and non merely to the private equity house you trained at for four undergraduate old ages before your formal ties with GS began. March 14. 2012 at 9:01 a. m.
GOLDMAN SACHS RESPONSE FROM: hypertext transfer protocol: //www. goldmansachs. com/media-relations/comments-and-responses/current/nyt-op-edresponse. hypertext markup language Goldman Sachs’ Response to March 14. 2012 New York Times Op-Ed The followers is the message Lloyd C. Blankfein and Gary D. Cohn sent March 14. 2012 to the people of Goldman Sachs.
By now. many of you have read the entry in today’s New York Times by a former employee of the house. Needless to state. we were disappointed to read the averments made by this person that do non reflect our values. our civilization and how the huge bulk of people at Goldman Sachs think about the house and the work it does on behalf of our clients. In a company of our size. it is non flooring that some people could experience dissatisfied. But that does non and should non stand for our house of more than 30. 000 people. Everyone is entitled to his or her sentiment. But. it is unfortunate that an single sentiment about Goldman Sachs is amplified in a newspaper and speaks louder than the regular. detailed and intensive feedback you have provided the house and independent. public studies of workplace environments. While we expect you find the words you read today foreign from your ain daily experiences. we wanted to remind you what we. as a house – separately and jointly – think about Goldman Sachs and our client-driven civilization.
First. 85 per centum of the house responded to our recent People Survey. which provides the most elaborate and comprehensive reappraisal to find how our people feel about Goldman Sachs and the work they do. And. what make our people think about how we interact with our clients? Across the house at all degrees. 89 per centum of you said that the house provides exceeding service to them. For the group of about 12. 000 frailty presidents. of which the writer of today’s commentary was. that figure was likewise high. Anyone who feels otherwise has available to him or her a mechanism for anonymously showing their concerns. We are non cognizant that the author of the sentiment piece expressed scruples through this avenue. nevertheless. if an single expresses issues. we examine them carefully and we will be making so in this instance. Our house has had its portion of challenges during and after the fiscal crisis. but your pride in Goldman Sachs is clear. You’ve non merely told us. you have told external studies. Merely two hebdomads ago. Goldman Sachs was named one of the best topographic points to work in the United Kingdom. where this employee resides. The house was the highest located fiscal services company for the 3rd back-to-back twelvemonth and was the lone one in its equal group to do the top 25. We are far from perfect. but where the house has seen a job. we’ve responded to it earnestly and substantively.