Last Wednesday Greg Smith, a mid-level Goldman Sachs executive director, very publically announced that he was leaving the company. Via, amongst other media, a letter in the New York Times, Smith decried the environment as 'the most toxic and destructive' he had ever seen it. I know, I know, 2008 called, it wants its enraged and indignant op-ed features back. However Smith’s opening paragraph comment is interesting - it could read as implying that there are degrees of toxicity and destruction that have been endemic in the business for years (maybe at residually low levels since...forever?), and suddenly they've reached an unacceptable threshold – or at least that's how I am going to sarcastically interpret it for the purposes of this opening paragraph.

It's an intriguing outburst, for a number of reasons. Clearly Smith really wanted to go public with this, and you can't get much more public than the New York Times (second in unique visitors only to the Daily Mail for news online). He obviously thought that some people would be surprised at the current state of affairs at Goldman Sachs; that leadership values in 2012 were lacking somewhat. Smith has well and truly burned his bridges, which is a bold thing to do in any industry, especially one which has been his life for so long. We can only assume that he has received sufficient recompense for his travails over the years and will be able to survive for a while until he decides on a different career path – financial analyst for the media possibly?

A word that's mentioned several times throughout the piece is, unsurprisingly, 'leadership'. 

"Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence."

"Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent."

 

You get the idea. Greg Smith is not overly impressed.

Their leadership values and structure undoubtedly have to change. Smith was disillusioned with many aspects of the GS hierarchy, and here are some ways they could address their endemic problems. Might I add, I do not hold a senior position in my company – think of this as my upwards appraisal of what qualities I believe leaders should embody:

"I don't know of any illegal behavior [sic], 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." To resort to a cliché, leaders in the financial sector have the chance to turn what is in some quarters considered a continuing crisis into an opportunity. It should be possible to reach board level at a major bank or hedge fund with your integrity intact. Honest capitalism doesn’t have to be an oxymoron.  

Essentially an extension of the last point, some accusations levelled at many of the senior management concern a certain selfishness. "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 of them."  I believe that you can still have the interests of clients at heart and turn a profit. Smith references the 'Goldman Sachs culture' so clearly believes that once upon a time it wasn't as 'toxic' as is now. Great leaders need to be in touch with their workforce and their clients and need to show some empathy.

"Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets’, sometimes over internal e-mail." Oh dear. Not only does it pay to be technologically savvy (it is 2012, after all), but it would also help to not engender such corrosive, negative thought about your paymasters in the first place. If you are that nasty, if you are the acid-tongued type, save it for face-to-face. For better or worse (for better, obviously), communicating electronically leaves a trail.

These are just three. There are plenty of other traits the contemporary leader must exhibit. Leading by example, for, er, example. No-one can accuse GS's senior management of not leading by example, quite the opposite in fact, but there is an unfeasible amount of work to be done to reposition themselves as having any kind of credibility.

To me, it's sad but perhaps inevitable that we are in a similar situation to the start of our current wave of economic problems four years ago. But, Greg Smith's assertion that "…if you make enough money for the firm…you will be promoted" is hardly a valid criticism of leadership-level bankers. Banks exist to make money, and while many banks have without question operated with dubious ethics for a very long time, to criticise the tenets of capitalism is naïve, coming from someone who spent over a decade at Goldman Sachs.

To end this on a more positive note, I think it's probably a minority that has ruined the reputation of a majority, but the minority ruined it to such an extent that to even defend the majority is a somewhat fruitless task. Oh well. I tried. I'm sure Goldman Sachs will survive.