7 Harvard Business School Students With Experience At Goldman Sachs Respond To Greg Smith's Letter

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*This post originally appeared on The Harbus, written by Jehan deFonseka.Last week, Greg Smith resigned as head of the Goldman Sachs U.S. derivatives business in Europe, the Middle East, and Africa, and wrote an op-ed in the New York Times describing the Goldman Sachs environment as “toxic and destructive”.

The Harbus asked every HBS student who had prior work experience at Goldman Sachs to volunteer their feedback regarding Smith’s op-ed.  Below is every single unedited response in the order they were received by us. 

These are the opinions of individual HBS students who worked at Goldman Sachs, and should not be assumed as representative of views of The Harbus or the student body as a whole.  

Response #1: Greg was right, clients are nothing to Goldman

Response #2: Trading and I-banking have different cultures...

Firstly, whilst it is healthy to express discontent, he is doing so in a childish and unproductive way. The downside is to hurt the firm's reputation without fixing any problems. He should have been expressing his frustration over the last 10 years and speak accordingly to senior leadership. The fact he was promoted means he likely kept quiet to stay on the promotion track, and is now leaving us with words of wisdoms whilst he has 12 years of bonuses under his belt.

Secondly, I agree that there is a two-tiered culture in Goldman Sachs. Most of HBS students will come from the Investment banking division where culture matters much more. I have sat on meetings where MDs were berated by partners for being too aggressive in valuations, leverage proposals or synergies on certain deals. There is also a strong understanding that pitchbooks may have some questionable estimates, but executed deals are 100% by the book. I cannot speak for the trading culture, but from hearsay i understand it to be much more aggressive and arrogant.

Source: The Harbus

Response #3: My colleagues at Goldman were good apples

Response #4: It's absurd to think Goldman doesn't know its only value is in its relationships.

This is the view of one guy, working in one division, covering one type of product, speaking to one client type in one of Goldman's 46 or so offices around the world. I am pretty sure most people are aware that Goldman is much more than this one division, one product and one client type, so to take this view and apply it over every business line that Goldman has should raise some eyebrows. I think some people get carried away into thinking that investment banks should be some sort of social enterprises. Inherently, they are not. Surely by virtue of the fact that what keeps them going is the existence of capital markets should scream out capitalism (sorry for the pun). And so, just as any consumer goods firm seeks out the next big opportunity, be it in packaging, product type or client base, so do employees of Goldman seek out big opportunities or so called elephant trades. It is not uncommon for a retail company to provide discounts and other incentives when a new product is introduced or when it needs to get previous season's items off its inventory. Getting rid of these 'axes' allow for these companies to create and introduce new products to helps to maintain their competitive advantage. Sure, a financial product is not a tangible physical asset, however, this process does not differ much to what other industries do. Do you not think that a firm in the services industry does not know that it is only worth its clients' patronage and ultimately trust? Goldman has no physical product that can be seen and felt to see its benefits. All they have, and hopefully, even the least smartest of them all can recognise this, is their relationships, reputation and maybe smarts. With these three being the driver of their long term value, how could this not be at the top of their minds when thinking about their business? It really is absurd to think it would be otherwise.

Source: The Harbus

Response #5: Goldman has a deep culture of risk management.

I think it's a shame that Mr. Smith feels this way, but the real tragedy is his failure to take any action besides leaving the firm. From the board level down to the financial analyst, Goldman has a deep culture of risk management. I experienced it from my first day as a summer intern to my last day as an analyst. And among the chief risks the firm looks to mitigate is the risk that its employees behave in exactly the way Mr. Smith describes--without putting its client's interests first. Goldman understands that its success rests squarely upon its reputation and therefore rewards its employees for speaking up and dissenting whenever they feel that a client's interest is not being considered. Whether Mr. Smith's experiences are true or not, it was his obligation to escalate the issue--as far up as it needed to go--instead of standing by idly, ruminating over the situation.

Source: The Harbus

Response #6: Smith was right, but there's nothing wrong with Goldman.

I'm not at all surprised by this. GS is the best bank because it knows how to make more money off its clients than the other banks. The financial services industry relies on client fees, so I don't see a problem with clients paying you for your work.

Source: The Harbus

Response #7 (from a former securities analyst): I've heard people make fun of clients

The op-ed was an accurate reflection of the GS culture. Goldman routinely rewards employees who make the most money for the firm, whether or not they are complete jerks. It's not uncommon for traders and salespeople to mock their clients' incompetency and share a joke with each other on the floor.

Source: The Harbus

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