Greg Smith leaves Goldman Sachs, raises moral issues

Maswood Alam Khan
Within the first week of my joining Agrani Bank as a probationary officer in 1977 I discovered, to my shocking surprise, that my senior colleagues often would visit a designated doctor to get phony prescriptions for themselves and their family members and cash those prescriptions at the counter of a nominated pharmacy, instead of taking medicines. It was an open secret that ‘a banker gets some extra money on account of false medical billing’. So common was the practice that my supervisors never told me that it was a serious crime.

Some of us wanted to protest against the corrupt practice. But we had to keep a stiff upper lip. On moral grounds, I often toyed with the idea of resigning. I didn’t quit as I needed a job and my fate was thus sealed in banking career where I did witness many immoral activities for about 32 years.

Not only false medical billings! Immoral doings of the bankers in our country were, and are still, found aplenty. I knew a senior banker – a religious person — who would not touch any bribe if the cash for bribes were not of brand new notes wrapped in scented decorative papers. To his weird belief, bribe was an honour to an efficient deliverer. The practice of ‘taking bribes’ from bad clients has been rampant and profit-making and personal interests always gain the upper hand over the national and clients’ interests in the banking industries of our country.

Greg Smith witnessed the immoral activities of bankers and finally resigned publicly last Wednesday (March 14) from Goldman Sachs, a renowned investment bank. In a frank letter published in The New York Times as an opinion article, Greg Smith, an employee in the bank’s London office, explained his resignation from Goldman, citing what he had believed was a “decline in the firm’s moral fibre.” Mr Smith writes that top executives of Goldman Sachs were so unsympathetic to the clients’ interests that at times they called clients “Muppets.” Smith wrote: “At meetings at Goldman, 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 them. If you sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.”

The question that Greg Smith has sparked: “Making money is good, but is making more money always better, even if it comes at the expense of clients?” Greg Smith’s letter has reignited public suspicion that the culture of Wall Street has swung so sharply to the profit side of the ledger of accounts that a client no more can expect to enjoy his seat in the first or the second row; clients are nowadays consigned to the dead last, though every bank publicly proclaims that it puts clients first.

It was a family business then of Mr Goldman or Mr Sachs. But, there is no Mr Goldman or Mr Sachs to be found on the board of directors of the investment company. The company has become a corporate zombie – all mouth and no heart. Since the financial crisis began in 2008, Goldman Sachs has faced a wave of criticism from politicians, regulators, protesters and writers. In an article, Matt Taibbi, a writer, calls Goldman a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

The credo a student of finance learns in his business school, is to place customers of a company first to be followed by their employees and only then the shareholders and the directors. The logic behind is that if you work for your customers, the firm would prosper and higher the share price would follow. If you put customers last and disgruntled your employees in the process, your business should eventually tank. But, ironically, today the pyramid of the banker-customer relationship has been inverted with directors’ pay, perks and bonuses and short-term shareholder value at the top of most of the companies, leading, unfortunately, to short-term profit-making decisions and destroying long-term shareholder value.

The trend of replacing long-term greed with short-term greed is everywhere. All businesses now follow this model, and we all suffer for it. Closing factories and replacing their products with foreign-made ones, or finding the lowest costs for materials with minimal regard to quality are the business practices that represent a race to grab money where the owners are enriched while the rest of us become more impoverished. This is what you may call ‘unregulated capitalism’. This is the same cultural deterioration that exists across not only the corporate world but also the political domains where clients and people are mere pawns only to be sacrificed for the gains of the greedy.

Corporations around the world are rushing for the gold to the detriment of all others. The rush has been so maddening that a corporation deems itself a loser if their current year’s profit doesn’t dwarf last year’s profit. The unbridled capitalist mentality coupled with unquenchable greed has brought us to the muddle we’re in today.

Greg Smith realised that being a part of a beast will make him a beast too. We applaud Greg and hope that his public letter of resignation raising the moral issues of Goldman Sachs will, at least, be a ripple in the big pond of the corporate world. If corporate heads contemplating an illegal or improper act restrain themselves from the fear of the possibility that some “colleague” may speak out in the future, our collective ethic may gradually improve.

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