Goldman Sachs is 'toxic' and 'destructive' says departing exec

In an article for the New York Times, Goldman Sachs' former executive director Greg Smith announces his resignation and lambasts the culture of greed and corruption at the investment bank.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
This must be some kind of whistleblowing spring. Today, Greg Smith, head of US equity derivatives in Europe and a veteran at Goldman Sachs with 12 years service under his belt, pulled no punches as he quit, launching a scathing attack on the company’s culture – or lack thereof – and its treatment of clients.

‘I can honestly say that the environment now is as toxic and destructive as I have ever seen it,’ he says. ‘The firm has veered so far from the place I joined that I can no longer in good conscience identify with what it stands for.’

London-based Smith baldly states the reason for his departure is the way that clients are now treated at the investment bank. The main problem is that the principles that the firm once stood for have been eroded, he says: ‘teamwork, integrity, a spirit of humility, and always doing right by our clients’ have been replaced by ‘making money’.

And the sums involved are staggering. Only last week, MT reported that Goldman’s Lloyd Blankfein is one of the highest paid chief execs in the land, taking home £6.64m last year. During the 2012 bonus season, the investment bank doled out $12.2bn to its high fliers, despite the fact that profits were down 47% on 2010. It’s a case of greed outweighing good business sense. ‘I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival,’ states Smith.

Of course greed is not a sin in the corporate world, and especially not on Wall Street where money is good and more money is better. Treating your customers badly, however, still is. ‘Not one single minute is spent asking questions about how we can help clients,’ observes Smith. ‘It’s purely about how we can make the most possible money off of them.’

‘It makes me ill how callously people talk about ripping their clients off,’ he continues. ‘Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets’.’

A longstanding member of Goldman’s elite recruitment team, Smith says that he knew the moment had come to leave the firm when he could ‘no longer look students in the eye and tell them what a great place it is to work.’ Ouch.

Of course Goldman is famously thick skinned and no stranger to criticism from regulators, politicians, the media (remember those ‘Vampire squid’ accusations?) and the general public. But this is first time a Goldman Sachs insider has decided to speak out so explosively, and it will be all the harder for the bank to brush off as a result. And while Smith does say that he knows of no illegal activity, it’s hard to imagine that there aren’t a few Goldman Sachs clients out there spluttering into their coffee this morning, wondering whether they're one of the 'muppets'.

 ‘I hope this can be a wake-up call to the board of directors,’ he concludes. ‘Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons.’

He’s certainly going to need to put his tin hat on after that lot. For the banks part part, a Goldman spokesperson has merely said ‘We disagree with the views expressed, which we don't think reflect the way we run our business.’ Somehow we think it’s going to take a bit more than that to get this potentially hugely damaging criticism to go away...

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