The CEO of Goldman Sachs Group Inc. (NYSE: GS) strongly defended himself and the firm Wednesday against charges by a just-resigned executive that Goldman cultivates a "toxic and destructive" culture that puts its own interests above those of clients.
Greg Smith, a 12-year veteran of Goldman, had blasted the Wall Street bank in a scathing resignation letter that was published as an opinion article in the New York Times. Smith most recently worked as an executive director and head of Goldman's U.S. equity derivatives business in Europe, the Middle East and Africa.
A Goldman spokesman confirmed for the Wall Street Journal that Smith, who was based in London, had resigned Wednesday morning.
In an essay headlined "Why I Am Leaving Goldman Sachs," Smith criticized Lloyd Blankfein, Goldman's chairman and chief executive, and president Gary Cohn, saying the two executives "lost hold of the firm's culture on their watch."
Blankfein and Cohn later addressed Smith's claims in a memo to Goldman employees.
"By now, many of you have read the submission in today's New York Times by a former employee of the firm," the two wrote, according to the Journal. "Needless to say, 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.
"In a company of our size, it is not shocking that some people could feel disgruntled," the memo continued. "But that does not and should not represent our firm of more than 30,000 people. 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."
Blankfein and Cohn emphasized the firm's commitment to client service and what they called widespread satisfaction among Goldman managing directors.
"Anyone who feels otherwise has available to him or her a mechanism for anonymously expressing their concerns," the executives wrote. "We are not aware that the writer of the opinion piece expressed misgivings through this avenue, however, if an individual expresses issues, we examine them carefully and we will be doing so in this case."
Goldman had been quick to reply to Smith's allegations soon after they began generating buzz online. In a statement Wednesday morning, the firm said: "We disagree with the views expressed, which we don't think reflect the way we run our business. 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."
A person familiar with the matter told the Wall Street Journal that Smith's role was actually vice president, a relatively junior position held by thousands of Goldman employees worldwide. Also, the person said, Smith was the only employee in the derivatives business he headed.
In his essay, Smith said he was disgusted at how the firm valued making money from clients over trying to help them.
"I can honestly say that the environment now is as toxic and destructive as I have ever seen it," he wrote. "I truly believe that this decline in the firm's moral fiber represents the single most serious threat to its long-run survival."
"The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for," added Smith, whose client base at Goldman had total assets of more than $1 trillion.
"I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It's purely about how we can make the most possible money off them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client's success or progress was not part of the thought process at all.
"I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs."
Smith also described how he felt "ill" while listening to people openly trying to rip off their clients. At least five managing directors referred to their own clients as "muppets" at that meeting, he said.
He added: "I don't know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client's goals? Absolutely. Every day, in fact."
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