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<div class="ad"> </div></div><div id="dealbook"><div align="left"><span class="timestamp published" title="2012-03-14T20:00:46+00:00">March 14, 2012, <span>8:00 pm</span></span><h3 class="entry-title">Public Rebuke of Culture at Goldman Opens Debate</h3>
<address class="byline author vcard">By <a href="http://dealbook.nytimes.com/author/susanne-craig/" class="url fn" title="See all posts by SUSANNE CRAIG">SUSANNE CRAIG</a> <span>and</span> <a href="http://dealbook.nytimes.com/author/landon-thomas-jr/" class="url fn" title="See all posts by LANDON THOMAS JR.">LANDON THOMAS JR.</a></address><div class="entry-content">
<div class="w190 right">Daniel Acker/Bloomberg NewsLloyd C. Blankfein, front, chief executive of Goldman Sachs, and Gary D. Cohn, its president.</div><p>Until early Wednesday morning, Greg Smith was a largely anonymous 33-year-old midlevel executive at <a href="http://dealbook.on.nytimes.com/public/overview?symbol=GS&inline=nyt-org" class="tickerized" title="More information about Goldman Sachs Group Inc">Goldman Sachs</a> in London.</p>
<p>Now everyone at the firm — and on Wall Street — knows his name.</p><p>Mr.
Smith resigned in an e-mail message to his bosses at 6:40 a.m. London
time, laying out concerns that Goldman’s culture had gone haywire,
putting its own interests ahead of its clients.</p><p> What the e-mail didn’t say was that about 15 minutes later, <a href="http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?ref=business" title="link to the op-ed">an Op-Ed article</a>
he had written detailing his criticisms was to be published in The New
York Times. “It makes me ill how callously people still talk about
ripping off clients,” he wrote in the Op-Ed article.</p><p>The Op-Ed landed “like a bomb,” inside Goldman, said one executive who spoke on the condition of anonymity.</p><p>The
article reignited a debate on the Internet and on cable television over
whether Wall Street was corrupted by greed and excess. By noon,
television crews crowded outside Goldman’s headquarters in Lower
Manhattan. More than three years after the financial crisis, the
perception that little has changed on Wall Street — and that no one has
been held accountable for the risk-taking that led to the crisis — looms
large in the public consciousness. While it was an unusual cry from the
heart of a Wall Street insider, many questioned whether it would prompt
any change.</p><p><br></p><div class="w190 right">Greg Smith, an executive at Goldman Sachs, resigned on March 14 and criticized the company’s culture.</div><p>Goldman
disagreed with the assertions in the Op-Ed article, saying that they
did not reflect how the firm treated its clients. Top executives have
previously said that despite some rough times of late, clients have
stuck with the firm.</p><p>Friends of Mr. Smith, who had a list of
Goldman’s business principles taped on a wall by his computers in
London, say they were not surprised by his public farewell. “He has a
really high moral fiber and really cared about the culture of the firm,”
said Daniel Lipkin, a Miami lawyer who went to Stanford with Mr. Smith.
Mr. Lipkin learned about the Op-Ed on Wednesday from Mr. Smith. “He
sounded confident and felt good about his decision to go public,” he
said.</p><p>Although he isn’t highly paid by Wall Street standards —
earning about $500,000 last year, according to people briefed on the
matter — Mr. Smith is part of what some Goldman staff members and alumni
refer to as a sizable, yet silent contingent within the investment
bank. These people are increasingly frustrated with what they see as a
shift in recent years to a profit-above-all mentality.</p><p>Evidence of this shift, they say, can be seen in the accusations brought by the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html?inline=nyt-org" class="tickerized" title="More articles about the U.S. Securities And Exchange Commission.">Securities and Exchange Commission</a>
in 2010 that the firm intentionally duped certain clients by selling a
mortgage-security product that was designed by another Goldman client
betting that the housing market would crash. More recently, a Delaware
judge criticized Goldman over the multiple, and potentially conflicting,
roles it played in brokering an energy deal. (In both cases, Goldman
has denied any wrongdoing.)</p><p>The reaction on Wall Street to Mr.
Smith’s resignation ranged from those cheering him to others criticizing
him for resigning in such a public way. Some within Goldman sought to
portray Mr. Smith as a lone wolf — he did not manage anyone — who had
failed to become a managing director. (There are about 12,000 executive
directors, the equivalent of being a vice president in the United
States, but only about 2,500 managing directors among Goldman’s 33,300
employees.)</p><p>Still, the ripple effects were felt beyond Wall
Street. Shares of Goldman fell 3.4 percent. And media coverage was
worldwide. “Goldman Boss: We Call Our Clients Muppets,” screamed the
front page of The London Evening Standard.</p><p>Others were less
surprised. One Goldman client who spoke on the condition of anonymity
called the letter “naïve,” saying that the firm had been trading against
its clients for years. “Come on, that is what they do and they are good
traders, so I do business with them.”</p><p>Another Wall Street
executive said it was “unforgivable” for Mr. Smith to make his opinions
so public and he should have taken them privately to the firm’s senior
managers. While Mr. Smith may have tried to raise his concerns with his
superiors in meetings, as a fairly junior employee, he did not have much
of a voice.</p><p>Goldman’s top two executives, <a href="http://topics.nytimes.com/top/reference/timestopics/people/b/lloyd_c_blankfein/index.html?inline=nyt-per" class="tickerized" title="More articles about Lloyd C. Blankfein.">Lloyd C. Blankfein</a>
and Gary Cohn, said in a letter to employees: “We were disappointed to
read the assertions made by this individual that 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.
Everyone is entitled to his or her opinion. But it is unfortunate that
an individual opinion about Goldman Sachs is amplified in a newspaper
and speaks louder than the regular, detailed and intensive feedback you
have provided the firm and independent, public surveys of workplace
environments.”</p><p>But questions about Goldman’s culture persist at a
time when the firm — and the rest of Wall Street — are undergoing a
transition as the postfinancial crisis framework of regulations known as
Dodd-Frank takes hold and as some profitable businesses show little
sign of returning to their precrisis highs. It is not a hospitable
environment for trading, yet Goldman remains very much a trading firm.
Mr. Blankfein, a former gold salesman, comes from the trading business,
as does the man who is seen as the most likely to succeed him as chief
executive in the next year or two, Mr. Cohn.</p><p>Mr. Smith started at
Goldman in sales. Born in Johannesburg, Mr. Smith is a grandson of
Lithuanian Jews who emigrated to South Africa. His father is a
pharmacist and his mother is pursuing a career in social work.</p><p>He
won a full scholarship to Stanford and after graduating in 2001 landed a
spot at Goldman, where he quickly worked his way up in the
organization. A table tennis player, Mr. Smith won a bronze medal in the
event at the Maccabiah Games in Israel.</p><p>He was sent to London
about a year ago to sell United States derivative products to European
and Middle Eastern investment funds.</p><p>What motivated Mr. Smith to
come forward now? People close to him said he had high hopes for an
internal report that came out after the S.E.C. case, which Goldman
settled.</p><p>In 2010, Goldman embarked on an internal study that
looked at the way it did business. The report reaffirmed the firm’s
principles and outlined changes aimed largely at bolstering internal
controls and disclosure.</p><p>But Mr. Smith thought it fell on deaf ears among senior managers, his friends say.</p><p>“I
think this was the ultimate act of loyalty,” said Lex Bayer, a friend
of Mr. Smith’s from high school in Johannesburg, who went to Stanford
with him. “He has always been an advocate for the firm, but he wanted
Goldman to do things the right way. In his mind, this was the only way
that he could change the culture of the firm.”</p><p>He may not be alone
inside Goldman. At staff meetings, Goldman’s leadership has been
peppered with questions about the firm’s public reputation, say people
who have attended those meetings, but who spoke on the condition of
anonymity because they were not authorized to speak on the record.</p><p>Mr.
Smith is making a considerable financial sacrifice in publicly
criticizing Goldman. Most Wall Street employees sign nondisparagement
and nondisclosure agreements before they join a firm. If Mr. Smith did,
Goldman may take legal action and refuse to release stock options he has
accumulated. Mr. Smith may also find it difficult to find work on Wall
Street after such a public resignation. A spokesman said that Goldman
tried to contact Mr. Smith on Wednesday. It is not known whether he
responded.</p><p>Mr. Smith did not speak publicly about his decision to
leave Goldman. On Wednesday, Mr. Smith received messages of support from
clients of Goldman.</p><p>“You do not know me, but I am a client of
Goldman Sachs,” one of them said. “We trade a lot with Goldman and we
know that we have to be very careful when we do so,” the person said.
“We understand your message.”</p><p>People who have spoken to Mr. Smith
said that he was flying back to New York on Wednesday night to see his
family and friends. These people say Mr. Smith still has no concrete
plan for what to do next. He tells friends that he wants to effect
change in Goldman’s business practices, although it is unclear what that
change would be.</p><p>Recruiters say it may be tough slogging for Mr. Smith to find work again on Wall Street, at least in the near term.</p><p>“There
is a rule of thumb when interviewing — you don’t bad-mouth your old
boss. No one wants to hear it,“ said Eric Fleming, the chief executive
of the Wall Street recruiting firm Exemplar Partners Technology. “You
can argue something like this needed to be said, but if you hire the guy
who said it you are taking the risk he will do it again.”</p><hr><br clear="all"></div></div></div><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br>