Jacki Zehner On Women, Money, and Changing the World  » Greg Smith and Goldman Sachs – The Story Continues….

March 22, 2012

Greg Smith and Goldman Sachs – The Story Continues….

On Tuesday I appeared on Bloomberg TV in response to the OpEd written in the NY Times by Greg Smith.  Betty Liu of “In the Loop” interviewed me and you can click to see the video here.  The first question she asked me was, “Why did I feel like I had to respond to this OpEd?” Given the limited time that television allows, and of course, my nerves, I want to answer that question here in my personal, yet public space. But, I will warn you upfront that it is long.  I would have made it more succinct if I had more time.

First, it is always powerful when someone shares their story, and that is what Mr. Smith did.  Stories matter.  Stories are what grab you in the gut.  Stories are what people remember.  A story can reflect a sense of idealism about what should be.  And, when the story is about Goldman Sachs, a company the world can’t seem stop talking about, it draws attention. True or not, fact or fiction, Mr. Smith’s story now lives forever in the pages of The New York Times and for many people, especially those who have not worked with or for Goldman, it might become their point of reference.

I have never been brave enough, or perhaps stupid enough, to tell my full story in such a public way. (There is also that “who cares” aspect as well.)  I have of course  told many stories in my 544 blog entries beginning in 2008. As it relates to Goldman Sachs I did tell a small slice of it in the book, More Than 85 Broads.  I think that story is very relevant to this public dialogue I now seem to be fully engaged in and I wish I could publish it directly on this blog.  The story is about me as a young woman trader, the working relationship with an amazing salesperson (Frank Coulson), and his very large client. It is not a perfect story, but it is honest, real and was a pivotal moment in my life.

Greg Smith told his story, and, as I said in my other entry, if it is in fact true, it is a big deal.  If it is not true, as Goldman stated in their press release with lots of evidence, it is still a big deal.  The story is out there and my point in writing what I wrote is to try to balance the narrative.  Although I did not think about it like this at the time, perhaps what I was really trying to do is to help create a new one.  That new one is about moving forward by means of everyone operating on a higher standard.  Everyone.  You, me, Goldman’s leadership, finance professionals in general, politicians, regulators, my dog Canaan (who is two years old and still pees on my office carpet). Everyone.

As I spent the day, and night, reading so many of the articles and, more importantly, the comments related to those articles, I became even sicker to my stomach.  I get that the financial crisis caused so much pain, but now what?  The main source of rage seems to be that certain players did not suffer consequences, which I also get. But now what? “The world is not fair”, said Margaret Thatcher, and so now can we all “do what we can, with what we have, where we are” to make it more so?

Some of you might well be thinking, easy for you to say, Jacki.  You have a nice life.  You took the money and ran.  You are one of them.  So let me share just a little of my story. I was born in a small town in Canada with great hardworking parents.  My Dad ran a grocery store and my Mom had different jobs to help support the family.  I was a good student, good athlete, went to college in Vancouver and ended up on Wall Street as an analyst in 1988. (This is a very long speech I just gave but I am trying to do the whole thing in a paragraph.) I worked hard, really hard, and I loved what I did, most of the time.  I was given the opportunity to become a mortgage trader in 1988 under the mentorship of some GREAT people like Mike Mortara, Tom Lasersohn, and more.  I did the best job I could. Looking back on my career I can honestly say I did my best to strike a balance between making money and serving customers.  Let me add that the product I traded was very transparent in terms of pricing.  I picked a lucrative industry on purpose because I wanted to have a challenging job, make money and have a nice life.  Is that in and of itself a bad thing? I thought that was the American dream?  Of course I was really lucky too, and I know that.  Looking back, I see how sucked in I got, how relative it became, and it embarrasses me in hindsight.  When the business is money, it can’t help be to some degree, a culture of money.   That said, I do believe that Mr. Smith was right in saying, the Goldman culture was special.  People were not only insanely bright, which made a huge difference; they were also very committed to the business and to the clients. My hope is they still truly are.

A good culture does not create itself.  A good culture happens because you put great beliefs out there and behavior follows.  There is accountability and bad behavior has consequences (e.g., less pay, less promotion, less responsibility in general, firing).  As with life in general, business in general, and certainly on a trading floor, there are countless opportunities to do the right thing, the ok thing, or the wrong thing. As time goes on, the culture becomes the aggregate of people’s attitudes AND behaviors.  It is about what happens, what is tolerated and what is rewarded.  I said the culture changed over the time I was at the firm, and yes I think going public was a factor, but so were many other things.

I wrote in my other piece about how the business may have changed and many people have written privately and publicly to me on that issue. In a brilliant letter sent to me by a former financial institution Managing Director, now hedge fund manager, he said this: “The extraordinary explosion of structured derivatives activity made possible by new instruments, computational power, and a never-ending search for yield by investors” was only the beginning of this story.  He went on to say:

“These new businesses were largely model-driven…were hugely profitable… and the power shifted to traders from relationship people, whether they were investment bankers or salespeople. So now we had an environment where traders and salespeople were going after the big trades…every firm was adopting the same business, and the leadership of these businesses were getting heavily paid and promoted….The key thing is that they were [all] commercially successfully in areas in which the profits made in “customer” business are not transparent, nor are traditional customers universally valued.”

This point about customers relates to the question I’ve asked previously, which is, ‘what is a customer?’  This former Managing Director’s three-page long email was amazing and, if given permission, I would love to publish it here.

To complete this part of the “story” would really require a book on what caused the financial crisis, and that has been written a few times already.  So, let me just say on this point, and as another former Managing Director also said in a personal email to me, “when did it seem to shift from ‘making money without doing anything wrong’ as opposed to ‘do what’s right and the money will follow?’”  Every financial services firm should ask themselves whether this question applies to them. This is about culture, about behaviors, about what is rewarded.

Goldman was a place where doing the ‘right thing’ was in general rewarded by promotions and by compensation.  There was accountability.  Our review process and Partner selection process was at the time, the very best in the world.  I know because we were constantly benchmarked against other organizations.  Jake Weiss, who ran the Office of Partner Practices, and now does independent consulting in this area, was the BEST at what he did and one of the most honest, loyal, individuals to ever walk this planet in my view. In his view, the integrity of the review process had everything to do with culture.  His job was to ensure the data was good, and then it was up to the leadership of the firm to use that data in their promotion and compensation decisions.  The process was as good as it could get when I had access to it.  We knew a lot about people in terms of their commercial ability, leadership skills, client relationship skills, and much more.  That said, promotion and compensation were ultimately subjective decisions.

Again, I could go on and on (and have!), so let me get to the point.  At a firm like Goldman Sachs, you MUST have people who are commercially-oriented, meaning that they bring revenue into the firm.  Revenue is a good thing, a great thing; but, you must be sure to strike a balance such that your revenue is consistent with your business principles and not in spite of them. Goldman says they are, Mr. Smith said otherwise.

I did go to Goldman’s web-site and read more about the self assessment they recently undertook.  They said “the scope and intensity of the Committee’s eight month review have been significant, encompassing every major business, region and activity of the firm.  We made 39 recommendations for change….” Clearly Goldman thinks they can do better.  As I said in the TV segment, what I am calling them to do is consistent with what they are doing – self examination and holding themselves to a higher standard moving forward.

Now, the second reason I felt compelled to respond is there were some things Greg Smith wrote that I felt were very true and deeply resonated with me (and I am sure that the leadership of Goldman would agree with these):

  • Goldman is one of the world’s largest and most important banks and what it does matters.
  • Culture was and is vital to Goldman’s success.
  • Clients matter, and if you don’t serve them well, if they don’t trust you, you will sooner or later find yourself out of business.
  • If you feel you are not living true to your values, and you have options, you should leave.
  • Leadership matters and leadership should be about ideas, setting an example, and doing the right thing.

The last point, in particular, hit me like a ton of bricks.  When I was working in the Executive Office, I got very involved in the firm’s leadership development efforts and, in fact, served on the committee that created “Pine Street.”   I became obsessed with learning about leadership, culture, and more.  One of my favorite magazines at the time was Fast Company.  In the March 2001 issue, there was an article by Tom Peters in which he writes about 50 leadership principles.  Some of these included principles like, “leadership is confusing as hell’’; “leaders love the mess”; “leaders deliver”, and so forth..  The 49th principle was left blank and Peters encouraged people to write in their own principle.  Well, for whatever reason, and perhaps because I had just seen a Batman movie or something, I wrote a principle called “Be a Superhero.” It read this way:

Be a Superhero.
Remember what it was like to jump out of bed on those Saturday mornings so you could rush to turn on the TV to get another dose of Superman, Batman, or in my case, Wonder Woman!  These characters inspired you to change the world, to do the right thing, to fight evil wherever it reared its ugly head.  To be an example, and yet hide your true identity because it was not about personal glory!! They never asked, ‘what’s in it for me?’, they never let the bad stuff get them down. They had a job to do and, damn it, they approached it with absolute enthusiasm and discipline.  Be a superhero! (2001)

I shared it with a colleague (you know who you are) who added some images, including one of Wonder Woman, and printed it out for me.  From that day forward, it hung on the wall of my office on the 30th floor of Goldman Sachs, until the very day I left.  You may notice that the wording is almost exactly that chosen by Mr. Smith in his piece.  So yes, Mr. Smith, it is about leadership, but leadership interconnected in a very dynamic business environment.

The whole conversation about ‘leadership’ feels in some ways very 1990s, but perhaps it’s time that we start a new and fresh version of it.  Joe Nocera wrote a great OpEd a few days later in The New York Times in which talked about, “The Good, Bad and Ugly of Capitalism.”  In it, he says that Howard Schultz, Chairman & CEO of Starbucks, will “take the podium at his company’s annual meeting and talk about the importance of morality in business.”  Amen.  The financial services sector has to be a leader in this as well.  Making large charitable gifts divorced from your for-profit business practices just won’t cut it anymore. ( and I am NOT accusing anyone!)  The public wants and deserves honesty, integrity and authenticity.  If your business is about making the most money you can, just say it, don’t hide it.  If you put your values out there, you have to be accountable for them and, when accused of not doing so, relentlessly defend yourselves.

I look at my leadership principle, ‘Be a Superhero.’ every day (and it now hangs in my office in Utah) every day.  And so began the story of the end of my days at Goldman Sachs; and the beginning of my story in the direction of my life’s calling, working for the advancement of women and girls. (Another possible blog entry alongside more on my ongoing obsession with Wonder Woman.)  In some weird way, ‘only God knows kind of way’, Mr. Smith’s story is connected to my story, and maybe everyone else’s story who works or has worked for Goldman Sachs.

The third reason I felt I had to respond is because what Greg Smith wrote was so extreme, so public, so horrible, and whether true or not, I read it and felt my heart break.  As I said in my previous blog post on this topic, I love Goldman Sachs.  It was a 14-year love affair, not without some ups and downs, some disappointments of course, but hey, I was far from perfect too.  I brought my junk to the relationship.  I will say that, like Mr. Smith, the day I knew I was no longer in love, or not in love enough, I resigned. Part of this decision was internal to Goldman, part of this were family obligations, and part other things.   That was a very hard day for me and, for many years after, I often wondered if I made the right decision.  Because of the work I am doing now with Women Moving Millions, I know I did.  WMM is about encouraging woman to step into their capacity to be global agents of change.  It is about mobilizing resources (charitable dollars, investment dollars, influence, voice and more) for the advancement of women and girls.  Every part of my being knows that a more gender balanced world will result in a more just and equitable world.  Goldman planted that seed and I will forever be grateful.

But at some level, I never stopped loving Goldman.  It is such an enormous part of my history that reading what was written, a claim that Goldman was “toxic and destructive” and more, was so painful that I had to do something and so I wrote on my blog.  It’s what I do.  Perhaps I should have called Lloyd Blankfein or Gary Cohn, but we do not have a personal relationship.  That goes for most of the other current leaders there as well.   If we did, that would have been my first step.  So, instead I wrote something that I felt would be balanced, constructive and additive to the dialogue in the hope of encouraging others to do the same.

Clearly I had more to say about the issue, sorry Forrest, and I still may.  Then again, maybe not. Thanks for reading and keep those comments and personal emails coming.

*A note about comments that are submitted.  In general I will publish them unless I think they are written in a disrespectful tone and are not additive to the discussion.  Sorry but I have feelings, and try as I might not take things too personally, when comments are directed to me from people I don’t know in such a hurtful way, it does hurt and I will not post it. 

*A note to the media.  I feel it is your obligation when you pull comments out from someone’s personal blog to try to represent the full piece accurately, or, at a minimum, link back to the post. With respect to my last post, the most explosive comments were the ones most often pulled, suggesting I came out as VERY anti Goldman, and that really was not right or fair. 

 

3 Responses to “Greg Smith and Goldman Sachs – The Story Continues….”

Cindy Kay OlsonMarch 24th, 2012 at 1:22 am

Jacki, I knew when I worked with you in 2001 you were insightful and unbelievably connected to Goldman and wanted to make it better. We had a great time benchmarking Enron and Goldman. What you have written mirrors what I felt and feel today about Enron. It was a great place with some of the best and brightest talent in the world. The Culture at Enron had become much of what you describe at Goldman….some values were not lived by all executives and the employees saw it. I worked for Enron for 23 years and loved the excitement that existed every day I went to work. As I read your last post I thought …Oh how I wish that Enron could have had the chance to understand what was happening to its culture….maybe we could have made some changes that could have allowed us to survive. Luckily for Goldman ….it has the opportunity to take a hard look at what might be a problem and fix it. One of the things at Enron that never changed was the fact employees felt they could not dissent. I feel (of course I don’t know) that Mr. Smith had tried to dissent and try to make things better but was not listened to. This was a fatal mistake made at Enron. Of course, no one really took the time to understand why Enron failed….the media contributed it to executives that were greedy and came to work everyday thinking of ways to defraud investors. I can assure you that was not the case. Much of what caused Enron to fail are some of the very things that I am reading now about Goldman’s culture. I believe there are some valuable lessons that could have been learned from Enron’s demise that were not. Hopefully, if what Mr. Smith says is true about Goldman it can be fixed to avoid a possible Enron like implosion. It was great to see what you have done with your passion!!

Cindy Olson
Former Executive Vice President of Global Human Resources Enron

FiscalliberalMarch 26th, 2012 at 11:49 pm

Kevin Phillips wrote a Book, 2008 “Bad Money – Reckless Finance, Failed Politics and the Global Crisis of American Capitalism” He predicted a rough road ahead for us. In the beginning of his book, he has this saying

Bad Money

Gresham’s Law…a general law or principle concerning the circulation of money…[named] after Sir Thomas Gresham, who clearly perceived its truths three centuries ago. This law, briefly expressed, it that bad money drives out good money, but that good money cannot drive out bad money

W.S. Jevons, nineteenth century economist

In a global free market, there is a variation on Gresham’s Law: bad capitalism tends to drive out good.

Professor John Gray, False Dawn, 1998

I would speculate that it might take a deep depression to drive out the bad money

Monika MitchellApril 17th, 2012 at 2:22 am

Jacki: Thank you for writing this beautiful piece. Your words resonated deeply in so many places with me.

“When did it seem to shift from ‘making money without doing anything wrong’ as opposed to ‘do what’s right and the money will follow?’…Every financial services firm should ask themselves whether this question applies to them. This is about culture, about behaviors, about what is rewarded. Goldman was a place where doing the ‘right thing’ was in general rewarded by promotions and by compensation. There was accountability.”

These are the questions for the industry to ponder. My hope is that your poignant words are a call to action for moral rectitude and a return of honor to a once honorable trade: finance.
It has been a heartbreak for anyone who knew Goldman “when,” to see the embattled post-crisis reputation of its former industry star. That the firm was the “best” for many reasons including ethics and integrity rings true for all who knew the firm under the leadership of people like Mike Mortara and Tom Lasersohn. I wonder if you got the chance to read, “Conversations with Wall Street.” My former partner and co-author Peter Ressler writes a lot about Mike and the former honor days of GS. So thank you for your deep insights and passionate pleas to return the firm and the industry to what made it great. Accountability & Customer Service.
Also many thanks for the work you are doing with WMM for women and girls around the globe. It does make a difference, an important difference, to show the world that on and off Wall Street, there are those who combine character with purpose to change the world for the better.

All the best
Monika
http://www.good-b.com

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