Op-Ed from Ex-Goldman Sachs (GS) Employee Has Wall Street Buzzing
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Overall Analyst Rating:
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Revenue Growth %: +9.9%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 2.1%
Revenue Growth %: +9.9%
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Wall Street is buzzing about a nasty op-ed in the New York Times discussing the disintegrating culture at Goldman Sachs (NYSE: GS) from Greg Smith, former executive director and head of the firm's United States equity derivatives business in Europe, the Middle East and Africa.
In the rogue piece, Smith said after nearly 12 years at the firm he can now say the environment at the firm "is as toxic and destructive as I have ever seen it."
Smith said interest of the clients is taking a backseat to making money. This wasn't always the case, Smith contends (huh?). He blames management, including CEO Lloyd Blankfein, and president Gary Cohn.
He said there are now just three ways to become a leader at the firm, and they all revolve around making more money. Here is his list:
a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit.
b) "Hunt Elephants." In English: get your clients -- some of whom are sophisticated, and some of whom aren't -- to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don't like selling my clients a product that is wrong for them.
c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
It's all about ripping clients off, Smith contends. To illustrate this he said five different managing directors called their own clients "muppets"; this even after the SEC suit, Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids?
There is no thought for the future, he said. "You don't have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about 'muppets,' 'ripping eyeballs out' and 'getting paid' doesn't exactly turn into a model citizen," Smith commented.
Smith said he hopes his op-ed is a wake-up call to the Board of Directors to put the focus back on clients. Otherwise the company may not exist in the future, he warned.
For its part, Goldman vehemently disagreed with the views from the former employee. "We disagree with the views expressed, which we don't think reflect the way we run our business," a Goldman spokesperson said. "In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves."
In the rogue piece, Smith said after nearly 12 years at the firm he can now say the environment at the firm "is as toxic and destructive as I have ever seen it."
Smith said interest of the clients is taking a backseat to making money. This wasn't always the case, Smith contends (huh?). He blames management, including CEO Lloyd Blankfein, and president Gary Cohn.
He said there are now just three ways to become a leader at the firm, and they all revolve around making more money. Here is his list:
a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit.
b) "Hunt Elephants." In English: get your clients -- some of whom are sophisticated, and some of whom aren't -- to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don't like selling my clients a product that is wrong for them.
c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
It's all about ripping clients off, Smith contends. To illustrate this he said five different managing directors called their own clients "muppets"; this even after the SEC suit, Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids?
There is no thought for the future, he said. "You don't have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about 'muppets,' 'ripping eyeballs out' and 'getting paid' doesn't exactly turn into a model citizen," Smith commented.
Smith said he hopes his op-ed is a wake-up call to the Board of Directors to put the focus back on clients. Otherwise the company may not exist in the future, he warned.
For its part, Goldman vehemently disagreed with the views from the former employee. "We disagree with the views expressed, which we don't think reflect the way we run our business," a Goldman spokesperson said. "In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves."
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