The pundits have lined up to comment on the SEC’s indictment of Goldman Sachs. The analysis, finger pointing and positioning mounts by the
Perception Matters – Perception may not be reality, but my perception is my reality, just as your is yours. Suppose for the moment that Goldman Sachs and everyone there are completely innocent. They will still have to deal with the impact on culture, their customer portfolio and the amount of angst and anger attached to the financial services industry based on perception. Even if it is all a fabrication (which it is not) and even if it has been blown way out of proportion, Goldman Sachs has reported record earnings in a quarter that they were indicted by the SEC and that perception will have impact.
And while we are on perception, I wonder what the perceptions will be about the party line vote of commissioners at the SEC. If the charges prove to be true, then Republican members will have their own battle of perceptions in an economic and political climate less forgiving of blanket support of big business.
Tolerating Bad Behavior Impacts the Whole Organization – It may be that this was a case of one bad apple, but it is also true that one bad apple can spoil life in the barrel for all concerned. Anyone else have a lot of friends who had nothing to do with Enron and nothing to do with auditing but still lost their jobs because they had built a practice at Andersen? The brand collapsed and the company folded because clients of all parts of the business, not just audit, defected in droves. It became an indefensible position to use what was one of the most respected nameplates in professional services and consulting because a few bad apples were tolerated long enough to bring the whole business down.
A Scapegoat Will not Make You into a Helpless (or Forgivable) Victim – Yes it is easy to point a finger at “The Fabulous Fabrice” whose email is perhaps the most damning evidence that is in the public domain. But was Fab working without a boss? Even in the fiefdom intense world of investment banking, someone must be looking at the deals who can see beyond bolstering his own ego or lining his own pockets.
Integrity Matters – Goldman Sachs makes a big deal about culture- primarily focused on duty to the client. If they are found culpable on the charges, then they will have been talking about duty to the client while lining their own pockets at the expense of those same clients. A culture (or company values statement or mission or vision) which is left in the lobby and the annual report and not carried into the day to day operations of the firm is worse than no statement at all. Walk your own talk- or just shut up.
Ben Stein, who is a lot smarter about this stuff than I am, was very stern with Goldman Sachs in his column for Bloomberg. He is careful to point out that at this point, there are only allegations. But he goes on to talk about the sheer hubris of their actions, should they been proven to be true. And he takes Goldman Sachs to task for even allowing the kind of culture that would tolerate the email we already know exists, and the attitude of its author.
Maybe perception really is reality.