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March 20, 2012

Last week, on March 14, 2012, the New York Times published an Op-Ed entitled “Why I am Leaving Goldman Sachs” by Greg Smith, a 33-year old mid-level executive that had been with the firm for close to 12 years. In his article, Mr. Smith denounces the environment at Goldman Sachs that has become “toxic and destructive,” and believes that the firm is focused solely on making money for the bank putting its interests ahead of its clients.

The article provoked consternation at Goldman Sachs. Shares fell 3.4% which represents a $2 billion paper loss for investors.

Lloyd C. Blankfein, the CEO and Gary Cohn, the president said in a letter to employees: “We are 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.”

There are many lessons we can all learn from this story. Let me mention just two aspects that I find interesting from an ethical point of view.

1.      One can never rest on the laurels of a good reputation and an ethical culture. Mr. Smith says that the culture at Goldman Sachs until recently had been one of “teamwork, integrity, a spirit of humility and always doing right by our clients.” The temptation will always be there for any company or individual to lose one’s focus and vision by being distracted by the legitimate need to make money. Many people believe that the culture changed at Goldman Sachs when the company went public which resulted in increased pressure from stockholders for management to generate profit.

2.       How can we determine when it is the right time to resign from the company that employs us once we have determined that we can no longer participate or be associated with activities that we find reproachful?

That is a particularly difficult question to answer.  Below are two questions we may ask ourselves before making that critical decision.

1.      Can I reasonably assume that I can be an agent of positive change, (when change is needed,) in the company that employs me?

2.      Am I making a positive contribution, in terms of human values, in the work I do?

If the answer to both questions is a categorical “no” then resigning is probably the right thing to do. There is a saying among ethics officers, that we should always have our letter of resignation ready in our back pocket.

Some have criticized the very public way Mr. Smith explained the reasons of his resignation and his motivation. I tend to disagree with those critics. As one of his high school friend, Lex Bayer said: “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.” I have a feeling by the very tone of the Op-Ed that was really his goal. One can sense a nostalgia for what Goldman Sachs used to be and a plea for a return to its former core values. Toward the end of the article he writes: “I hope this can be a wake-up call to the board of directors.” I share his hope.

As the American poet and filmmaker James Broughton once said:

“My major aim in writing is to set out flags and issue wake-up calls.”

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