Goldman Sachs Suffers From Betrayal

19 Mar

In recent years, investment banking has become a frequent choice for top college students considering their career paths after graduation. However, as we learn how destructive greed can be from the past financial crisis, we begin to ask ourselves, “Are investment banks really the best places to work?”

Recently, the former Goldman Sachs executive Greg Smith dropped a bomb on Wall Street by publishing the controversial article “Why I am leaving Goldman Sachs” on New York Times as he resigned from the firm on the same day. He criticized the culture of the firm as “toxic and destructive,” and the employees “callously talk about ripping their clients off.” As a result, the stock price of Goldman Sachs dropped 3.4% that day, and the company image took an even harder hit. A single article cost Goldman Sachs more than 2 billion dollars in stock value!

As one of the biggest investment banks in the world, Goldman Sachs has been criticized for misleading its clients. In April 2010, Goldman Sachs paid $550 millions dollars to settle a fraud case in which the federal government claimed that Goldman Sachs misled its customers with a subprime mortgage product when the market began to melt down.

The top management of Goldman Sachs has a quick response to this incident. In the internal memo sent to all the Goldman employees, CEO Lloyd Blankfein and President Gary Cohn said “the assertions made by this individual do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.”

Well, in front of a charge from an experienced former employee with vivid details to support, simply saying this individual doesn’t represent the whole firm really doesn’t help much.

by Zack Gong



2 Responses to “Goldman Sachs Suffers From Betrayal”

  1. Jacob Trunsky March 20, 2012 at 4:53 am #

    Great post, Zach! I find it interesting that Goldman Sachs only issued an internal memo and did not do any external damage control by communicating with the public, investors, or clients. This may be a scenario where Goldman is one of the best in their business and executives believe clients will come to them even if the culture portrayed in the article is true. Additionally the company might not feel the need to respond because the image of greed in investment banking is industry wide.

  2. seanfeng April 17, 2012 at 3:36 am #

    This scenario is a great example of how sticky messages really make a difference. It seems that this disgruntled employee had unexpected stories, which really affected the public perception of the company. If perhaps Goldman Sachs replied with equally detailed and specific counterexamples, it could have minimized the effect of the damage. While investment banks have suffered public perception drops over the course of the last few years, especially after the subprime mortgage crisis and Occupy Wall Street movement, they have not make a unified effort to regain public trust. Though their core business might not be affected greatly by public perception, they should still try to be more personable to offset these type of scandals.

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