Today Goldman Sachs faces its worst PR nightmare yet: a stunning resignation letter from one of its bankers, published in the New York Times. He lays bare what he sees as the bank’s cultural shift over the past few years towards acting in its own interests, at the expense of those of its clients. What’s interesting is that hese are accusations that have frequently been made before – most famously in the Rolling Stone ‘vampire squid’ article – and they echo mutterings that have long been heard from rivals around Wall Street and the City of London. In the end, Goldman has always been able to shrug these off, and because of its market power the clients have mostly continued to hang around. But is it different this time? The letter is so damning, and so hard to deny as it comes from a senior insider and appears to have the ‘ring of truth’.
I’m struck by the fascinating parallel between Goldman Sachs and Rupert Murdoch’s News International.In corporate reputation terms, I’m struck by the fascinating parallel between Goldman Sachs and Rupert Murdoch’s News International. Here again, it was widely known that bad practices including phone hacking had taken place at the UK tabloids such as the News of the World. Nobody seemed to care too much until The Guardian reported that the phone of murdered schoolgirl Milly Dowler had been hacked – so it was no longer just a case of celebrities, politicians and royalty as victims, who could ‘take care of themselves.’ Particular revulsion was caused by the suggestion – subsequently disproved – that messages had been deleted from Milly’s voicemail, giving false hopes to her parents that she was still alive. Suddenly, everyone cared about phone hacking; now, executives have been arrested, three enquiries are under way and politicians who once paid court to Mr Murdoch have rushed to distance themselves. With Goldman Sachs it is a question of whether clients will now wish to continue to be ‘gouged’ or treated as ‘muppets’. Within every big corporate Goldman client, the question will be asked: why are we still dealing with these people? How can we justify it? How will it look to shareholders and other stakeholders? The trickle of clients heading for the exit has the potential to turn to a flood. This is much more than just a PR embarrassment. Expect massive changes at the bank, including top-level departures and a wholesale attempt to ‘clean out the stables’ and change the culture. It will be a matter of survival.
In media terms the Bank has hardly played a blinder. If Goldman had been really smart, it would have done far more to soften its arrogant image a long time ago, preferably before the depths of the credit crunch. It is almost certainly too late now to try to build bridges with journalists and get ‘its side of the story’ across.
New York Times article: http://nyti.ms/y6uact