During the last week Greg Smith wrote an editorial about why he was resigning from Goldman Sachs, where he said “the environment now is as toxic and destructive as I have ever seen it.” Until his resignation, he was executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.
My first thought in reading his letter was that he’s probably in a heap of legal trouble. Whether the situation warrants it or not, I bet he’s at risk of getting slapped with a slander/defamation suit. He makes a number of pretty harsh claims and I’d expect Goldman Sachs to want him to substantiate them all—as if somehow failing to do so meant things were really fine and he should have kept quiet.
After all, I expect them to argue, Goldman Sachs lost 3.4% of their market value Wednesday after the resignation letter went public, a bit over two billion dollars. Amazingly, shares were back up by 2.2% the next day, bringing the loss to a matter of mere hundreds of millions. I’m guessing the market’s conclusion is that no one cares—that people probably already knew this is how such businesses work. Losses were probably taken by idealists who had thought otherwise, and the cynics probably just saw it as a buying opportunity. Still, it must have left some ruffled feathers and I expect someone to give Smith a hard time about it.
In addition to being hard to substantiate, I’m guessing that at least some of Smith’s remarks violate some confidentiality agreement he had to sign in order to get his job. I’m not privy to any such specific agreement, and yet I’m confident it’s standard practice for such a business to require that employees at his level formally agree not air the company’s dirty laundry with the general public.
I personally have no idea what his involvement was in any of the allegedly inappropriate goings on and can only speculate on that as well. But one has to at least commend him for trying to break the cycle. The only thing is that his manner of coming clean may have made a personal mess for himself. And if it does, it won’t exactly be a shining example others will want to follow. That would be sad, I think.
If we want people to do more of this, we need to make better protections for them. What protections? That’s harder to say. But it doesn’t mean we shouldn’t collectively give it some thought.
Oh, sure, there are probably whistleblower laws that may protect some people who can prove outright crimes. But I suspect it’s often difficult to make those cases, and it’s not difficult for businesses to menace the people who do. And for people who can’t prove a crime, but merely suspect one, there’s probably little legal room for grumbling.
Whistleblowing is about clear breaches of law, but we don’t even have a name for the rightful questioning of a gray area that falls short of crime. Or maybe we do. We call it disloyalty. We say the employee is wrong to question something without proof. We allow companies to fire people for stuff like that.
As the old saying goes, “Almost only counts in horseshoes and hand grenades.” We may almost protect an employee who speaks out about something they think is happening, or know is happening but can’t document, but almost protecting them means not protecting them at all. If an employee has no smoking gun to show some degree of certainty of an outright crime, they’re obliged to stay silent. Nothing to report. No way to talk about “almost” or “mostly” without violating confidentiality contracts.
It might be possible, as a society, to decide to weaken the right of companies to require or enforce such agreements, but I’m guessing that is an uphill battle. Still, our collective failure to address such issues leaves employees who can only almost prove a problem with little to do but cringe. Of course, it’s great that Smith felt he could resign and speak out, but I’m guessing he had a few dollars in the bank when he did. By contrast, most of us aren’t executive directors of economic institutions and that means most of us couldn’t afford to resign from a paying job just on a matter of principle.
It’s a pretty hard for a regular person to take such a stand. Jobs are scarce, and many employees have not only their own well-being to think of, but their families’. So I’m betting they stick it out. I’ve got no evidence to point to, I’m just speculating aloud, but it seems clear to me that this is a fertile breeding ground for things we as a society don’t want to have happen. There’s probably a lot more that should be said all over, but no incentive for anyone to say it.
I guess it’s kind of like the way some don’t want government to fund preventive health care but they’re willing to have it fund emergency room care, when it would be better and cheaper in many cases to prevent a problem before it got to being an emergency. We don’t want to intrude on companies that only might be in trouble; we’d rather just wait until we’re sure they are.
Strange, though, that the GOP lately seems to want government to intrude on the most personal details of ordinary people’s morality, but wants us to keep our hands off of the morality of corporations—even as they insist that corporations are people. You’d almost think there was some sort of double standard, like maybe they didn’t believe all people were created equal.
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Comments
As for this: "My first thought in reading his letter was that he’s probably in a heap of legal trouble", I think Lloyd Blankfein and Co may want to think twice before starting down that road. One never knows what might come crawling out once you lift that rock and expose the insects underneath to the light
While all the cautions you mention are worth consideration, I suspect that in his position Smith had access to some pretty damning information. And I'm also guessing he was smart enough to make copies before he went public.
As far as confidentiality, there's also a precedent there, too> Remember the scientist who went public on Big Tobacco. Jeffrey ??, who was the subject of the movie The Insider? Seems to me a good case can be made that a confidentiality agreement involving illegal acts is nothing more than evidence of a conspiracy punishable under the RICO statutes.
I totally agree that there could be a power play of that kind here. I'd compare it to something more familiar to me, though, which is “fair use,” which I brushed against in my parody site Another Way Out now some years ago. Because one cannot get a ruling in advance from a Court affirming that what one is doing will in fact be protected under the legal theory that is intended, it must be a deterrent to people going ahead. And that's even in the case where one has, as I did, clear law on one's side. So go a step further and look at what you're suggesting, which isn't nearly as clear cut, and you see how difficult it must be to proceed.
A great deal of law is not about laws but about intimidation—convincing people you have the law on your side when you're not sure, keeping people from bringing action even when it's warranted, etc. That's why people often just compare bank accounts to decide who's going to win. It can be a real test of wills to get to the place where Government does its part. Ultimately, the law allows the little guy to win sometimes, but not often enough one ever feels really confident about it.
Perhaps the issue here is culture of a company. Something that is normally assigned to HR. Which shows its priority right there. Put up a poster. Hold a team building session. Call it a day. And with leadership development (which I did professionally up to 2008 always working for one firm at a time--unlike now when I contract) pushed into a corner or cut---the importance of action driven values has all but evaporated.
I know Goldman Sachs has a history of integrity "issues". My Dad left the firm in 1974. I understand he "everybody does it" mentality. And whistle blowing laws are tiny band aids
What's tough is selling the world that the ethic you are talking about here, hurts all of us.
IN POST MORALITY AMERICA, NO GOOD DEED GOES UNPUNISHED!
well said.
Sadly it is not only the Republicans who have betrayed us in status quo cronyism against whistleblowers. Under Obama MORE whistleblowers have been prosecuted than under any other president.
I read scanner's blog about the insanity of US warmongering and what it is doing to the troops let alone its foreign victims and yet Bradley Manning who showed how surreally evil it all was and the vast scope of it, or tried to, faces a possible death sentence because he defied confidentiality because he saw such grotesqueness of ethical laws and legal ones being violated. What about the essence of the Nuremburg trial, taking orders is not an excuse for violating humanity.
Rules of engagement in war in Middle East includes 360 degree rotational fire if there is ANY commotion occurring in a vicinity. Just don't kill your buddies, unless they aren't doing 360 degree rotational fire themselves -- then they are trouble-making conscience-mongerers. Killing Samaritans helping the wounded was fair game as Manning's revelations showed. Were those murdering soldiers ever prosecuted? No, but Manning was subjected to solitary and to ritualized sex abuse at the beginning for months in which our Prez was well aware and endorsed and God knows what schizo America will do to him as ultimate punishment.
So many in America at times ALMOST take a stand for good vs. evil, but let each other twist in the wind ultimately. Fear. Fear of bucking cronyism status quo even if everyone is sinking into the quicksand together.
I am in a work situation in which I endured abuse over six months ago, complained about it, and have been continuously punished for rocking the boat in terms of bad reviews suddenly and withheld bonus and raise by management. I dared object to something that was unignorable. I was naive to think there would be bottom line empathy even though the situation was serious. To do something about my situation was too inconvenient and reflected badly on the conditions management had put in place so they had to cover up their own responsibility even though that was part of what went down. It was stunning the need to cover their asses so to punish an employee who needed help was the only answer. I am still at the job because I am so afraid I cannot find another, and have to put my psychological welfare and right to a just and sane work environment second after my economic welfare. But still persecuted and may be forced out on trumped up bullshit. IT SUCKS!!!
It is surreal, and it is not one bad apple in management which would be a whole different story, it is a full out CLIMATE of toxic cronyism that has no empathy for those whom they are supposed to be managing. Management has turned Gestapo, but I am sure that is true not only of my company but rampant, as they slash wages and benefits, signed off on by corporatism captured politicians. libby
Round up the usual suspects.
The matter comes up even in the issue of Wikileaks and what can be leaked. There's it's a government issue, and national security, but it's the same thing: We tell people that “just following orders” is not adequate as a defense, but what else are people to cling to. You'd want them to be able to say they saw a violation of the Constitution or some other promise. And yet people on the line, where the action really happens, often aren't allowed the perspective that would let them evaluate such things.
Lefty, it's sad that it comes back to that, but one must behave as if it's possible for there to sometimes be a different outcome, I think. Or at least work toward that end.
ps theres an interesting article floating around about how obama was in favor of whistleblower protections but that his admin is not working out that way eg harsh prosecutions of whistleblowers eg NSA whistleblower, bradley manning. its a little surprising you dont mention manning in this.... a highly related/relevant topic.... Im presuming you do not support manning.... anyway goldman sachs deserves a lot of scrutiny & I would argue that its standing after the last crash only because of a highly finetuned cronyism network with the govt officials eg Geithner etc.
Rick: How can you close me up? On what grounds?
Captain Renault: I'm shocked, shocked to find that gambling is going on in here!
[a croupier hands Renault a pile of money]
Croupier: Your winnings, sir.
Captain Renault: [sotto voce] Oh, thank you very much.
[aloud]
Captain Renault: Everybody out at once!
If this is it -- what a yawn.
FWIW, Goldman has a number of separate businesses -- prime brokerages, proprietary trading, investment banking, etc.
If you are a customer and Goldman is on the other side of the trade.... We all know in advance who is going to come out ahead.
The customers are not widows and orphans.
And .... people in all businesses do refer to their clients and customers in derogatory ways all the time. Ever worked at a hospital?
I'm not a fan of cigarettes, cheap handguns, alco-pop, and any number of other legal businesses.
Just consider this another point of view. Don't expect anyone to agree.
I love the topic, and like others, I couldn't help but think of Manning's scenario and the related cult of authority that makes whistle-blower laws necessary (!)
I'd be interested in hearing what you think is the important difference between the Manning and Smith situations, and, if you've got time, try on the devil's advocate hat for a while and tell me why we *should* hinder whistle-blowers.
As for me, I'm a long-gone radical cynic who is that way because the idealism makes me so. :) It seems that the world got this way in increments, and can be something else, so why not try? Always look on the bright side of life, eh?
But widows and orphans are the recipients of the risks GS takes--many small municipalities and families suffered when the housing market collapsed or were left holding the credit default swap toxic whatever-the-f*@K they were. We all took a bath and bailed these charlatans out.
In other words the whistle-blowers can protect more than just customers, or, stated differently, we're all customers of GS.
Probably it's more correct to say we're all subjects.
A lot of stuff has, not surprisingly, been cleared up by markets. Try to get a no doc, sub prime mortgage today! No one will ever sell a CDE^2 again in our lifetime.
But, there are still areas that should be fixed. I would like to most of the trading and all of the derivatives hived off into firms that are plenty small enough to fail.
Plus, get rid of 90% of credit derivatives. Etc.
But -- looking for the root of all evil in GS is a stretch.
90% of the bad stuff that happened was legal. Not only for GS, but the entire housing bubble -- from the poorest borrower to the largest lenders -- and including everyone with their hand out from appraisers, agents, builders, tradesmen, lawyers, and on and on.
Those at the top of the food chain need to take more of the responsibility -- but by no means all or even the majority.
Big subject. We might agree on more than it appears.
I'm done.
The bigger picture is the sadness I feel for the worker who is trapped in a job in today's economy who knows of corruption and illegal activity yet cannot speak out. The burden must be unbearable.
The current POTUS and his administration are certainly not making life any easier for any whistle blower. Greed is a hard master. And since election season is in full swing I expect to learn little except how much money Wall Street tosses in the ring. Too bad in today's America, our elections mean little except which bought and sold lackey is a good TV sell .
I certainly would love to see some whistling on that.
All of these whistleblower issues have the risk that the person doing it will be said to be a hypocrite. Well, we'd still rather they do it than not but it's an interesting issue.
On the matter of Manning, by the way, see my comment to Chicago Guy above for some of my thoughts. That whole “just following orders” thing is complicated to be sure. And Tom Cordle sort of addressed the issue of what confidentiality agreements might or might not cover, but I stand by my reply to him in which I siad there is more to the intimidation aspect of law than a Court would resolve. A company can sometimes make one feel that they can't speak out in cases where it might have been OK, and certainly the overbroad language of many of these agreements is chosen with an awareness that people may overconstrue conservatively and feel boxed in by things that courts may have sorted out—things the employee won't always be aware of. It's not like one can borrow corporate counsel to get an answer.
Its all about class, comrade. All about class.
Divide the commoners on the basis of culture, race, religion and ethnicity. But make sure they know to never bite the master's hand.
Lance, on the matter of Manning, I think if there is a difference (and I'm not sure there is), it's in the criterion that's acceptable to use for deciding when to speak out. Manning might be able to lean on some violation of the Constitution, for example. In a commercial setting, the issue might be some breach of fiduciary duty or something. I'm frankly not sure how to turn either of those cases into a slam dunk, so it's a little hard to compare them for as fuzzy as they are. But if we want people to even sometimes do these things, we need to make it clearer at least what we're after. At some level I think all whisteblower cases rely to some extent on the fact that there is danger for their truth value, since if you could do this kind of thing with no risk, people might be doing it for all kinds of other reasons, just to get ahead. My 2009 article Disobedience, Civil and Not-So-Civil touches on this related matter to some extent.
Mission, there's so much I could say about Obama. Most of it, though, would comedown to the fact that Democracy itself is a pretty blunt tool, too, not capable of very nuanced control by the electorate. One often ends up picking the less bad of the various options. And for all of Obama's flaws, most of it comes because he leans so far Right (compared to other Democrats). It's not like the Republicans are offering another direction, just a more intense version of same; in years past, I think Obama could have passed as a moderate Republican. He and Romney aren't all that different, except that I think Romney has more willingness to pander aimlessly and less personal vision, but on their natural tendancy toward certain issues they start out about the same. I don't see really progressive positions from Obama on a great many issues, including this one, which is why OWS hasn't just picked him as their obvious champion. (Then again, by eschewing conventional process, OWS has somewhat squandered a chance to really push the dialog in new ways. I think they could have done better. Maybe they'll make a stronger push in the general election, but really I think the time to make useful strides would have been in the primaries. Unless they're planning a phyiscal overthrow, which I trust they are not, OWS will at some point have to become more effective at working through existing processes, even ones they don't like, or be powerless.)
Still, that isn't always the case, especially when the govt gets involved. We saw that with the Civil Rights movement and prosecutions at the Federal level where none could be achieved at the state level.
We saw it again when govt decided (at too long last) to go after Big Tobacco (tho the recent silly ruling that govt mandated horrific images on cigarette pack violated the tobacco/cancer industry's right to free speech -- huh?) was certainly a step backward and idiotic juris-imprudence on a par with the Citizens United decision.
I suspect Goldmine Sux, et al, will be in a heap of trouble, if the DoJ starts prosecuting criminal acts, and civil suits will add to the woes of those who think money leaves them above the law. I suspect -- or I should say I hope -- things may change in that regard if Obama is re-elected. One hint that may be the case is that Lloyd Blankfein has apparently hired a very expensives criminal law firm.
There -- did I tie enough loose ends together to make a Gordian Knot?
This is a great article. It's full of insight and sound thinking.
"I guess it’s kind of like the way some don’t want government to fund preventive health care but they’re willing to have it fund emergency room care, when it would be better and cheaper in many cases to prevent a problem before it got to being an emergency."
So true.
So much of what gets done nowadays reminds me of the guys who hire an ambulance service to pick up bodies that fall from a dangerous cliff rather than building a fence at the cliff's edge to prevent folks from falling to begin with.
Rated and appreciated.
rated with love
Poetess, I have no way of knowing, but it seems likely in some ways. Still, even supposing it so, that's the trade we often make to get higher up the food chain, like “turning state's evidence” in a trial.
As for Greg, I'm pretty sure he already had a position elsewhere (maybe his own company?) by the time he wrote the famous letter (for someone at his level). I'm certain several potential clients would like to work with a person who has this kind of attitude; that is working for the client (even if untrue).