Last week, Greg Smith decided to resign from his position as an executive director at Goldman Sachs with a bang. He lashed out, via an op-ed in the New York Times, at the predatory and indecent banking culture that is the norm at Goldman Sachs, claiming that the company had detracted from its previous mission of “teamwork, integrity, a spirit of humility and always doing right by our clients.”
This mission does not correlate with today’s public perception of Goldman, a company that has frequently been entangled with the Securities and Exchange Commission. Last September, Goldman employee Spencer Midlin and his father were charged $92,000 by the SEC for insider trading based on information he received as an employee. That March, Goldman Sachs board member Rajat Gupta was also charged with insider trading, for allegedly giving information to Galleon Management founder and hedge fund manager Raj Rajaratnam. Gupta has since been arrested by the FBI, and his case is pending. Examples like these stretch back almost a decade, and Smith’s op-ed proves that the consequences have not been enough to create a culture shift at Goldman. On a systemic level, the cost of this kind of culture was felt by the American people with the financial crisis of 2008, when inadequate regulation and unethical corporate practice proved catastrophic for the entire economy.
Smith declares in the op-ed that the public will cease to remain apathetic about these activities, which could lead to serious consequences for the company. This process has already begun: the global Occupy movement began as a protest to the culture and operating practices of big businesses like Goldman, where profits are favored above clients. While while the protests changed the dialogue surrounding the banking system, we can see that they did not fundamentally change its culture.
But although Smith’s piece attracted a lot of short-term attention, it sadly will also fail to provide the impetus for change in the financial sector. By the following day, countless parody op-eds popped up on the Internet. Goldman stock dropped on the day of the op-ed, but has since recovered.
Companies like Goldman Sachs will never voluntarily sacrifice profits for the common good. As such, the responsibility falls on the government to curb their excesses. If nothing else, this op-ed and Goldman executives’ track records should demonstrate that more regulation is needed to ensure not only an ethical financial sector, but one that follows the law. As future leaders in finance and government, Georgetown students should view this as an opportunity to internalize the lessons of the financial crisis and push for more responsibility in the future. Failure on the part of ourselves or our government to do this not only ignores Greg Smith’s somber warnings of corporate excess, but invites more financial ruin and economic pain for the entire nation.
