Harpooning the Goldman Goose (contd.)

Posted on Mar 16, 2012 | 16 Comments

Unless you’ve just emerged from an isolation chamber, you’ve probably encountered the New York Times op-ed by disillusioned former Goldman Sachs employee Greg Smith. That’s the one in which he notes “how callously people talk about ripping their clients off” at the firm.

Many people have praised Smith for his courage. As for us, we noted earlier this week that Peter Drucker insisted on the importance of integrity for an organization’s survival.

Still, while anyone would agree (at least officially) that integrity is important for success, not everyone would agree that Smith’s public disavowal of Goldman was the right thing to do. For instance, former George W. Bush speechwriter David Frum tweeted, “Nice of NYT to give Mr. Smith such a prominent ad for his new financial firm.” In Forbes, meanwhile, several business leaders and career counselors expressed disapproval of Smith’s op-ed, including one who said it “raises questions about this fellow’s integrity and loyalty.”

And what would Drucker have thought?

He would, without question, have commended Smith for looking hard at himself and assessing his own values. “To be effective in an organization, a person’s values must be compatible with the organization’s values,” Drucker wrote. “They do not need to be the same, but they must be close enough to coexist. Otherwise, the person will not only be frustrated but also will not produce results.”

Image source: Wikimedia Commons

But Drucker, as we’ve noted before, was wary of whistleblowing. He believed that people should follow an ethics of “interdependence,” under which obligations between employer and employee are mutual, not one-sided.

“In the context of the ethics of interdependence, whistle-blowing is ethically quite ambiguous,” Drucker wrote in The Changing World of the Executive. “To be sure, there are misdeeds of the superior or of the employing organizations which so grossly violate propriety and laws that the subordinate (or the friend, or the child, or even the wife) cannot remain silent. … [But] whistle-blowing, after all, is simply another word for informing.”

And Drucker took an unambiguously dim view of informants.  “Perhaps it is not quite irrelevant that only the societies in Western history that encouraged informers were bloody and infamous tyrannies—Tiberius and Nero in Rome, the Inquisition in the Spain of Philip II, the French Terror and Stalin,” he wrote. “For under whistle-blowing, under the regime of the informer, no mutual trust, no interdependencies and no ethics are possible.”

What do you think: Should Greg Smith be praised or condemned for speaking out against his longtime employer?


  1. ee okpa
    March 16, 2012

    I praise Greg Smith for exposing the ‘evil’ and devilish attitude in some of these institutions that have become too large for the world. Until we expose the inner workings of these institutions, we all will always be short of living true life. It reminds me of the book ‘Den of Thieves’ about Wall Street crash of 1987. Goldman Sachs, may just be that ‘Den of Thieves’.

  2. Jim
    March 16, 2012

    I praise his decision. I blew the whistle where I used to work, and agree with Drucker’s statement
    ” To be effective in an organization, a person’s values must be compatible with the organization’s values,” As a supervisior, I would want my staff to be able to sound the whistle if something was a miss.

  3. Richard B Mann PhD
    March 16, 2012

    I do not have enough facts to praise or condemn Greg Smith. However, I agree with Drucker, If personal values are not compatible with a company’s operating philosophy, leave on terms that do not jeopardize the future. Nevertheless, if a person has leadership abilities that can help change the system, use it wisely. As second in line of power I was able to drop hint in weekly meetings that came back several weeks later as ideas from my boss, which I then praised him for good workable possibilities. I never took credit for the hints, but praised my boss. This is the only way a subordinate can effectively change an organization, IMHO.
    Greg “earned” high rewards for 10+ years before blowing the whistle. How long did he work under bad conditions? Was he complicit? Was his action done to get a movie contract? Maybe to advertise a new company that he would start that would not rip off clients? What was his motivation? I need answers to decide whether to praise or condemn.

  4. Evaggelos Vallianatos, Ph.D.
    March 16, 2012

    Greg Smith did the right thing. Goldman Sachs has been partially responsible for the unethical behavior verging on crime on Wall Street. These corporations wrecked the economy of this country and yet no one from these firms has gone to prison yet. That is unjust and unacceptable. The relevant question for a business school is how is the school teaching finance and economics to instill ethical standards on the students. Universities ought to denounce the dangerous behavior of Goldman Sacks and other Wall Street companies.

    Drucker is wrong on this issue.

  5. Juat Muay
    March 16, 2012

    If the medium is the message (Marshall McLuhan), Greg Smith’s piece in the NYT Op-Ed hints of opportunism.

  6. Mike Grayson
    March 16, 2012

    I agree with Drucker that whistleblowing is quite ambiguous, especially in the case of a disgruntled employee. I’ve had the opportunity to work with some of the management of Goldman Sachs and they never exhibited anything but the highest level of professionalism, including those who worked for a new venture funded by Goldman. These were bright and highly ethical people. So, to paint everyone who works there with a broad brush is just plain wrong and unethical.

    There are complaints on this forum that nobody has “gone to prison” yet. As far as I know, we still live in a country that operates under the rule of law. If someone has evidence of criminal wrong doing they should hand it over to the authorities and it should be investigated. Angelo Mozillo, the former CEO of Countrywide was fined $67.5 million by the SEC, and many of the gamblers on Wall Street lost their shirts.

    I would venture to say that the corruption in Washington finds it way to Wall Street, and it is the real head of the snake, and should be severed. Peter Schweizer, in his book, “Throw Them All Out”, did an excellent job of investigating politicians who were investing in Wall Street, while at the same time tipping the legislative scale so that they could make millions, all legally of course, but highly unethical. The common man would find themselves in jail for such action.

    So my question is, why does Greg Smith get so much attention for his weakly supported claims, when gross corruption in Washington, that is proven beyond a shadow of doubt is largely ignored?

    And what ever happened to the “investigation” of Solyndra, after the $573 million loan guarantee of a company using political connections? They filed Chapter 11 and were still proposing a bonus of $500,000 to employees until it was stopped by a judge. And, by the way, Oklahoma billionaire, George Kaiser, who was a big backer of Obama in 2008, will still get paid under the bankruptcy agreement, but forget about the suppliers and employees. I guess it depends on whose team you are on as to whether or not you walk away with the golden ticket.

  7. Joann Melgar
    March 17, 2012

    Many years ago I left a 15+ year career with a very large and powerful Federal government agency because I had gradually drifted away from the prevailing philosophy of increasing the size of the agency to achieve the missionn rather than developing more expertise from within to achieve the mission. While whistleblowing from an upper level manager from that agency would have thrilled elements of the press, I wouldn’t have considered it. That was before I studied with Peter Drucker and had my decision validated.

    In the case of Goldman Sachs, we have an institution that has apparently abrogatedl ethical practices for, not years, but, decades. Eventually, an executive had to take them to task in a public way. We’ll see whether Greg Smith’s opinion piece is a catalyst for change of whether the culture is so firmly set that nothing changes it.

  8. ee okpa
    March 17, 2012

    There should be Greg Smith in everyone of us.

    The vices in any and every society continue unabated when [wo]men of goodwill keep silent and watch humanity devalued and trashed all in the name of going along to get along.

    Slavery in America lasted as long as it did because people chose to keep quiet.

    In today’s America despite the ‘holier than thou’ stance spun and sold to the world as ‘American values’, we are crumbling internally.

    Living in US has entrenched my believe that all that glitters is not gold. It’s more like zinc on tarnish with a facade of shine.

    We must speak up and damn the consequence.

    When I read ‘Den of Thieves’, I came to the realization that all it took for the rest of us to sweat, is for a few individuals to manipulate Wall Street, and also get rich/wealthy doing so.

    Peter Drucker or not, what is true is true. I didn’t need to imbibe the teachings of Peter Drucker to understand when bad things are allowed and permitted to go unchecked for decades both by design and default, it becomes a tradition.

    We do a lot of that in US America, because with ‘mine is right mentality’ hoisted on defaulted sense of ‘superiority’ and import of superlative terms to describe our presence in relation to and in comparison with others, we believe we are ‘God’s gift to humanity’. Well, no one ever says their ‘mama’s soup is sour’. Do they?

    Someday, the chicken comes home to roast. I rest.

  9. Donna Guidos
    March 17, 2012

    This all starts in grade school when the bullies get away with their viciousness for fear of being labeled a tattle-tale.

  10. George L. Williams
    March 17, 2012

    Peter also decried the death of loyalty (in all directions and at all levels) in large companies. Loyalty died with the rise of the corporate raiders and stock-price pumpers in the late 80′s. Check out the paint hangar firings in Susan Faludi’s “Stiffed”. Over the ensuing decades it spread from industry to industry and to government (to many of those “representatives” that industry bought).

    Finally the collapse of loyalty and the concurrent collapse of trust brought on the 2008 meltdown.

    Renewed trust can not be commanded, it has to be earned and that will take longer than decades.

  11. Kim Hall
    March 17, 2012

    A part of me admires Greg Smith. There have been a couple of times that I would love to speak out against certain ‘attitudes’ from a former employer. However, as long as they were only attitudes then like opinions everyone is entitled to have one . . .

    On the other had, I do not consider this whistle blowing. Whistle blowing is when a company is committing a crime that can cause harm to others and someone comes forward. Enron, Maddoff, Countrywide, dumping waste, etc…. These people need protection. Indeed, these people are National Heroes! I respect and admiration. And quite frankly, I am surprised that Peter didn’t make this distinction. He talked often and loudly about corporate responsibility.

    So Goldman Sacs employees call their clients names and take advantage of their clients, one could argue that that is how they make money. Their clients are not unknowing consumers, the public, tax payers or investors. Goldman’s clients know what they are getting into and are motivated by their own agenda. In other words, they signed up to play. And they stay in the game because it works for them.

    Yes, Goldman’s behavior is in bad taste. But I don’t think of Greg Smith as a whistle blower.

  12. Maverick 18
    March 17, 2012

    Formally, a whistle blower is one who exposes illegal or tortious activity. Greg Smith is more of a disgruntled employee who may be hyping his upcoming book or talk show appearances. Nevertheless, a fundamental principle applies, “Nobody likes a rat.”

  13. Alba Patricia Valencia
    March 18, 2012

    Bad prognosis, but inaction breeds doubt and fear, and action breeds’ confidence and courage.

    Mal pronóstico, pero la inacción crea dudas y miedos, y la acción confianza y valor.

  14. David Robinson
    March 19, 2012

    I agree with Smith 100%. Loyalty can only happen when it is a two way street, something you rarely see. I work for a southwest municipality which recently published every ones salary along with names under the guise of “Transparency” What a joke, there is no transparency even within the Departments. Misdeeds are constantly covered up. The same occurs in big business or even hospitals as anyone who is married to a nurse can attest. I think loyalty went out with the massively overpaid CEOs.

  15. The Feedback | The Drucker Exchange
    March 20, 2012

    [...] seemed to be talking about the New York Times op-ed by Goldman Sachs employee Greg Smith. And we joined in. Smith wrote that the firm had lost its moral bearings, and now he had to quit. Should speaking [...]

  16. Steve Snyderman
    March 22, 2012

    Was that whistle blowing? If Smith reported that the earth was round, I would have been equally surprised.


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