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March 16, 2012 10:23 am

A Jewish View on Greg Smith and the Goldman Sachs Affair

avatar by Adam Jacobs

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CEO Lloyd C. Blankfein at FT Goldman Sachs Business Book of the Year Award 2011. Photo: FT.

I’m sure that by now everyone has heard about ex-Goldman Sachs employee Greg Smith’s epic resignation letter as shared with the world through the Grey Lady. What, if any, could be some Jewish take-aways from this unusual maneuver? I thought of three:

Lashon Hara (negative speech)

While the Torah does enumerate a positive commandment (called tochacha) to give rebuke when others are doing wrong, there is a style and a methodology to it. By and large this means that we employ the “Oreo” technique – first saying something nice up front, followed by the carefully placed sticky stuff, and rounded out by a cookie compliment at the end – so it’s good, less good and good again. This is obviously a much gentler delivery mechanism, and one that is much more likely to be heard. Dale Carnegie, in his classic “How to win Friends and Influence People,” outlines, in case after case, how “calling people out” rarely works and even if it does will just create pent up hostility that will eventually come back to haunt us. It’s no wonder then that Goldman does not appear to be doing any intense reflection (ie: “guys, Greg is really right, we really have lost our bearing and change is long overdue. Let’s take the rest of the month off for client sensitivity training!”) Rather, like most people when stung by the barbs of others, they are just angry and defensive. Here’s one reaction that I read, “Greg Smith was an insignificant peon with no responsibilities.” Maybe they would have been more inclined to listen if Greg had sprinkled his commentary with a few positive statements as well. Just sayin’…

Dedication to one’s employee

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While it’s never ok to cheat, shortchange, or misadvise anyone, an employee’s first responsibility is to his or her employer. This means that throughout the entire duration of one’s employ, one must be focused on fulfilling one’s responsibilities. If the job description is to make money for the employer, then the employee must utilize all of the (legal and ethical) resources available to make this happen. Greg made it sound like that primary responsibility is to the client and to the best of my knowledge that’s just not the case. Jewish law takes this mitzvah very seriously and would consider personal emails, Facebook use, unduly long coffee breaks and the like to be theft from the employer. It certainly is not a wonderful attitude to regard your clients as “Muppets,” but as long as you don’t take Fozzie, Gonzo or Beaker for a financial ride, I’m not sure what the issue is.

It’s ok to make money

Unlike some other spiritual traditions, Judaism has little issue with the accumulation of wealth. Abraham, Isaac and Jacob were business men (among other things) and many of the sages of the Talmud did very well for themselves. It’s true that wealth can present its own set of challenges and obstacles that can hinder ethical development, but so can poverty. Our main responsibility in life is to bring about the greatest good we can with the tools that we have at our disposal. While our net worth does not correspond with our self-worth, neither does it make a wealthy person any more ethically suspect than anyone else. It could very well be that there are a lot of greedy and opportunistic people at Goldman Sachs (there are, sadly, in many places) but we should be careful not to reflexively equate the idea of the pursuit of wealth with greed and bad character as it’s not an accurate (or fair) way of looking at the world.

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  • Credentialed Financial Pro

    @Yisroel – You are a phony, and you insult my people by posturing yourself as someone who takes Judaism seriously. If you truly were “Yisroel,” you would think (and maybe do a little research) before you write.

    Your comments such as “Smith’s allegations were entirely about Goldman making investments for clients…” and (directed at this blog’s author) “…you apparently don’t understand the first thing about what a bank does…” are palpably incorrect. I speak as a credentialed professional on the subject, who a court would very likely realize as an “expert witness.” You, on the other hand, are simply a know-nothing blowhard who spews hyperbole without doing any homework.

    Since you (“Yisroel”) are not paying me to bring you up to speed, I will limit the free service I provide toward your (sorely needed) financial education to one tip: Look up the word, “fiduciary” in some authoritative reference source. Then compare and contrast what you learn from that initial effort, to the concept of a broker or dealer.

  • Alois Kr

    I am sure Goldman Sachs would have been very impressed by your Oreo-technique!

    The only voice they understand is money and the letter worked at least in this respect!

  • Yisroel

    “If the job description is to make money for the employer, then the employee must utilize all of the (legal and ethical) resources available to make this happen. Greg made it sound like that primary responsibility is to the client and to the best of my knowledge that’s just not the case.”
    – I can’t believe anything that foolish made it to print, even on the Internet. Smith’s allegations were entirely about Goldman making investments for clients, when the exact representation they are making in every case is that, yes, they are maximizing how much money the client will make through the investments (adjusted for the risk the client wishes to assume, but NOT adjusted for the profit Goldman wants to make). If they weren’t really doing that, there was an unethical misrepresentation to the client. If you question Smith’s claim, fine, but not questioning his claims and then questioning his logic because you apparently don’t understand the first thing about what a bank does when making investments on behalf of clients? That’s just sad… You may have had a good point about the lashon hara (I’m sure Smith must have met some nice people there and even ethical ones – many Goldman employees are not directly involved in selling investment ideas to clients). But the rest of this piece is absolute rubbish. Not sure how to top off this Oreo…

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