Goldman Sachs’ CEO Said What?!?

After a week-long trip and a return through multiple airports as part of a 17-hour journey, I thought I was out of touch.  Then, I heard a hyperbolic CNBC reporter attribute a statement to Lloyd Blankfein, CEO of Goldman Sachs, that I initially discounted given my fatigue.  But, having gotten some rest and having previously lauded Mr. Blankfein for declaring public interest to be a necessary component of executive compensation schemes, I must now shake my head in near disbelief.  If media accounts are accurate, Mr. Blankfein recently stated that he, Goldman Sachs and presumably other investment bankers were “doing God’s work” by making capital available for businesses to grow and thereby create wealth for others.  In the midst of understandable public indignation over the prospect of billions in bonuses for thousands of employees at Goldman Sachs while tens of millions go unemployed and millions more underemployed, Mr. Blankfein (and/or those charged with preparing him) made an egregious error.

Blowing one’s own horn invariably requires the finely tuned ear and deft timing of a skilled musician.  Mr. Blankfein showed himself to have neither.  Claiming to be aware of the public mood, he made the unwise choice to take center stage and blow a series of notes that are sure to haunt him and Goldman Sachs for some time to come. 

Goldman Sachs may very well be an instrument of wealth creation for some, but what Mr. Blankfein failed to appreciate was that few, if any, of his real audience were among those privileged enough to hire that instrument, much less directly enjoy its music.  In this instance, Mr. Blankfein asserted responsibility instead of acting responsibly and, as a result, sounded self-serving at best  In so doing, he cemented rather than eroded a negative corporate and industry reputation held by the Public, the Pundits, and the Policymakers.   History will determine whether Mr. Blankfein’s remarks will go down in the annals of reputation mismanagement, but, in the meantime, these 3P’s need to hear (and see) something quite different quite soon.   

Perhaps instead of proclaiming Goldman Sachs to be responsible for doing God’s work, Mr. Blankfein would do better if he were to remember that to whom much is given, much is expected.  Spend more time nurturing and building upon that sense of responsibility, Mr. Blankfein, and real progress is possible.

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Corporate Responsibility and Reputation: It’s Business and It’s Personal

Umair Hague recently argued that a new generation of radical corporate innovators should reinvent Wall Street from the bottom up.  Yet, such a notion presumes the innovators already are positioned to take such action; they simply need to take the bold steps he recommends.  What the recent financial crisis has revealed, though, is that businesses generally and financial institutions in particular have experienced and fostered a debilitating disconnect between their objectives and those of the broader public.  The result–constricted senses of responsibility and damaged reputations–have diminished businesses and individuals alike and have impaired their ability to contemplate, much less pursue, the innovations Mr. Hague recommends. 

Care for a more concrete example?  As noted in earlier posts, executive compensation remains a “hot button” issue for the public, financial services institutions, and policymakers.  With a few notable exceptions, many financial institutions made no substantive efforts to self-regulate and instead stonewalled.  Apparently fearing the slippery slope of how far mandatory regulations might go, these institutions rejected any attempts to cultivate that slope through principled, intermediate steps such as those enunciated last month by the Conference Board or at the G-20 Summit.   Contrast a reported federal cap of $200,000 in total compensation for top executives at the financial products unit of TARP-recipient AIG with Credit Suisse’s decision to make its own “radical” pay plan changes to grasp how significant the difference can be. 

While it may be too late in the short-term for some like AIG and six other TARP recipients, it is not too late for institutions prepared to take a longer term view of the value to be gained by reconfiguring and reconnecting responsibility and reputation.  Inaction, indecision, and inertia are sure to produce more results like those in store for AIG’s financial products unit.  Alternatively, taking a hard look in the mirror reveals our ability to move forward without waiting for the government’s regulations or the market’s “invisible hand.” In that mirror, the fuzzy excuse, “It’s not personal; it’s just business” gives way to reconfigured responsibility and reputation, both business and personal, being clearly and inextricably linked. In that mirror, we are freed to look beyond next quarter’s profits and see more places where business and people’s interests reinforce one another. 

Such reflections are not the dream-induced product of Alice’s looking glass or coded support for excessive government intervention where all solutions emanate from political capitals.  To the contrary, these reflections, combining responsibility and reputation, provide the vision and platform on which we and “they” should build the wide-ranging, integrated reforms necessary for the long-term success of our financial system and individual businesses.  They provide the vision and platform for companies to differentiate themselves in the minds of a number of stakeholders and to begin forging a competitive advantage.

Next case ripe for reflection vs. more of the same–watch developments around the proposed consumer financial protection agency in House and Senate bills concerning financial services regulatory reform.  Which institutions, private and public, will use the mirror, not for purposes of looking backwards, but to see new ways to reform not only the current regulatory scheme but also their responsibilities and reputations?  Who will be willing to leave the herd and lead?  Which organizations will be among the first to realize that no case can be made for meaningful, more strategic self-regulation unless and until affirmative steps are taken to rebuild trust?

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Corporate Responsibility and Reputation: Reconfigured and Reconnected

The last post called for all of us to take a hard look in the mirror as part of financial services and overall business reform efforts.  In doing so, our definitions of corporate and personal responsibility must be reconfigured.  They cannot just be different lists of what we are or are not responsible for.  Rejecting the false choice between “hard” numbers and “soft” people skills, we also must routinely consider who our businesses affect.  Reducing everything to numbers, systems, and processes ultimately diminishes responsibility and leaves us on the more perilous route we already have traveled.  

Next, we must go beyond reputation management and actually rethink how and where reputation comes into play in business.  As a general matter, business people’s reputations certainly have plummeted.  Though they reinforce this lowly status, the name-calling and simplistic invocations of a “good” Main Street vs. an “evil” Wall Street we have seen and heard to date certainly do nothing to correct our economic woes.   By the same token, the efforts of some in Corporate America to act and demand payment like masters of the universe seem to ignore this state of affairs to the detriment of far too many.  To break this downward spiral, reconfigured reputations mean that we in business must reconnect what we value in ourselves and companies with who and what our communities value.  A prior post cited JP Morgan Chase CEO Jamie Dimon’s invocation of a necessary link between business and the “broader public.”   Consider also Goldman Sachs CEO Lloyd Blankfein’s advocacy of balancing executive compensation structures with the “public interest” and not letting financial instruments “outstrip their economic and social utility” (emphasis added).  

While some rush to craft conspiracy theories and other unsavory explanations, I cannot help but conclude that these leaders’ efforts to reconnect and be stewards of responsibility and reputation ties into the business success of their enterprises in relation to others in their industry.  Question a causal link if you must, but surely the association is not only worth noting but presumably is worth replicating in your business.

Taking it a step further, calls to responsibility and reputation admittedly mean little without sustained demonstrations of ethics and character.  These essentials are more than some tone at the top.  Their substance and dimensions grow or shrink depending on the concrete actions each of us takes every day throughout the organization. This is the personal responsibility that cements a business reputation.

Shakespeare knowingly advised that our ultimate responsibility is to guard our reputations:

     Who steals my purse, steals trash . . .     But he that filches from me my good name,

     Robs me of that which enriches him not and makes me poor indeed.

In business, as well as in our personal lives, failing to heed this advice ultimately leaves us where we collectively find ourselves today—poor indeed.

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Corporate Responsibility: Individuals Also Need to Look in the Mirror

Almost another month has passed since the one-year anniversary of the demise of Lehman Brothers.  For the most part, financial services reform legislation introduced earlier this year has languished behind health care, though recent hearings and rumblings offer some signs of life.  The bipartisan Financial Crisis Inquiry Commission charged with investigating and reporting out the causes of the financial meltdown just got started last month. 

Leave aside for a moment the disappointing fact that we, the people, and many of our public institutions like legislative bodies and the media, our vaunted fourth estate, have such difficulty grappling with more than one major issue at a time.  On the financial services front, it is no small matter that we seem to have put the cart before the horse.  Not that the Commission is the “be all to end all” in terms of providing answers, but it is unfortunate to say the least that federal solutions are being debated, crystallized, and politicized through legislation at the same time the official, public inquiry meant to identify the very problems we are trying to solve is just beginning.  But, I fear we have an even bigger problem.  

By and large, what discussion there has been about financial services reform has focused on “them.”  Be it Wall Street, Congress, fat cat CEO’s, regulators asleep at the switch, “they” have riveted our limited attention to date.  Yet, in the midst of all of the finger pointing, I have seen or heard precious little about what the millions of us who work for businesses large and small can and should be doing to further the necessary reforms in financial institutions and businesses generally. 

Before claiming that there is nothing that can be done, let’s remember that collectively we made minor deities out of CEO’s and all those who reaped hundreds of millions of dollars.  We bought into the idea that short-term profits alone could be our long-term guide.  We believed quantitative financial models unleavened by common sense and real-world experience revealed the future.  We acted and invested as if what goes up continues to go up and what goes around never comes around. Having made these mistakes, corrective action cannot be limited to public policies and prescriptions for other people’s compensation, other companies, and other-worldly financial instruments no one really understood.  

It’s time to look in the mirror and acknowledge we’re all on the hook for turning things around.  The starting and ending points for corporate reform lie within each of us, within reconfigured senses of individual responsibility and reputation.

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Technology and Operations as Corporate Responsibility Tools

In a recent presentation at UCLA Anderson School of Management, Todd Maclin, CEO of Commercial Banking for JP Morgan Chase & Co, made an interesting observation.  Asked to cite reasons for the relative success JP Morgan Chase had compared to its peer institutions in navigating the financial crisis, Mr. Maclin spoke first about systems.  More specifically, he credited the company’s technology platforms and structure of operations with providing a level of real-time data and transparency that enabled business leaders and managers to maintain consistently responsible trading positions. 

For me, this emphasis on the critical role that an organization’s “nuts and bolts” play is essential to making credible a company’s statements about its responsibilites.  In a June opinion piece, Mr. Maclin’s boss, Jamie Dimon, made a compelling proclamation about financial institutions’ obligations to the public.  Eschewing an exclusive focus on maximizing shareholder value, Mr. Dimon, CEO of JP Morgan Chase, stated:

 Above all, no matter what the regulatory framework is, . . .  our accountability is not only to our shareholders, customers and employees, but also to the broader public. . . . Americans must see that the work we are doing is not just about earning a profit, but also about creating value that helps consumers, small businesses, government agencies, nonprofits and the whole economy.  

Mr. Maclin’s example reflects the necessary alignment of this occasionally abstract sense of corporate responsibility with the core of an organization through very concrete tools like technology and operations.  Of course, it takes more than tools for a company to act responsibly, but, without them, attaining the strategic goal of embedding stated corporate values all along the corporate value chain ranges from improbable to random.  That’s certainly no way to run a business. 

For a look at this in a consumer products setting, check this out.

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Corporate Responsibility: Another Permutation

Hurry and check out Peggy Noonan’s editorial, Keeping America Safe from the Ranters.  She too identifies responsibility as a missing piece.  Switching metaphors, in part, Ms. Noonan compares the “gold standard” set by some titans of journalism like Cronkite and Safire with the frequent dross that passes for contemporary journalism.  As you read it, substitute players and examples of both from your own company or industry.    

Ms. Noonan then goes beyond stating justifiable concerns about the coarsening and corrosive nature of much of what we hear today in the media.  She courageously calls out those on the left and the right and demands that our public voices “set an example, encourage the helpful, stand for the good, pass on the lore, take responsibility.”  (Emphasis added).  What I particularly applaud is her acknowledgement that the proliferation of media platforms and outlets enabled in large part by technology and formats like blogs does not absolve the people involved from taking such responsibility.  Those who will emerge as leaders, New Elders as Ms. Noonan calls them, and be capable of pulling us back from the precipice will “have to be mature, think of the collective, of the country as a whole.”

What specifically that would look like in each of our businesses is up to us, but it’s fair to analogize and say that today’s economic climate and business conduct has placed many of these enterprises and industries at a similar precipice.   As a result, the framework still applies.  Ranting still remains counterproductive. 

Taking responsibility in a corporate setting is not just about the Elders in the corner offices; it is about each of us setting an example and thinking of a collective (i.e., something bigger than ourselves).   We will have to be more mature than the name-callers who might label such perspectives as “socialistic” or “soft” in an effort to preserve the status quo.  We can and should take into account the public interest as we pursue private benefits. 

For the cynics, the suspicious, and those inclined to dismiss such thinking as having no place in what should be a Milton Friedman-esque world of capitalism, see my September 17 post on ROR-Return on Responsibility  and stay tuned for a post on Rosabeth Moss Kanter’s new book, Super Corp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good (Crown Business, 2009).   We live in an increasingly messy and complex world.  The tidy, binary edifice where organizations either relentlessly pursue profit and maximize shareholder value or pursue some social good is showing cracks.   Those cracks represent opportunities to seize a competitive advantage, to leave the herd, to cultivate the slippery slope, to be, in Professor Kanter’s words, part of the vanguard.  Why wait?

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Ethics and Responsibility

What started as a laugh warped into a bit of melancholy.  For those who still like to flip through paper and newsprint, the following headline appeared today above the fold in a major national newspaper: Ethics at Issue for Senator In Aid to Lover’s Husband  .  The laughter came from the resounding obviousness and the veil of seriousness over what sounds more like the tabloid story next to the one about the most recent alien abduction.  [The online headline toned it down a bit substituting Aide for Lover’s Husband.]  Of course, ethics (or the lack thereof) are implicated.  However, as with many headlines (whether in larger, boldface print or shouted by talking heads of various stripes), the real story has so much more which, in this case, leads to the melancholy. 

What is saddening and maddening about the story?  In chronicling the numerous ways this public official sought to put a lid on the disruption caused by his affair, the article not only details Senator John Ensign’s steering of clients and work to the “aggrieved” husband, but also reveals: 

  • Some, including the US senator involved, questioning whether there really is an ethics issue.  Regardless of party affiliation, can we agree that engaging in such legalisms is rarely persuasive in the court of public opinion and often a place of temporary refuge at best?  If the conduct is deemed legal or the law is deemed insufficient to reach such conduct, the issue of ethics in most people’s everyday vocabulary will remain.
  • The disappointing corollary that we need laws, whether an Ethics Disclosure Act for government officials or a Sarbanes-Oxley Act for corporate officials, to stake out some bright lines for a handful of miscreants despite however obvious those lines appear to the vast majority.
  • The pinched view of what it means to be responsible and to infuse that sense of responsibility with a less self-centered, more other-directed ethical core.   In this case, taking responsibility for his actions seemed to remain focused on the Senator–supplementing a direct payment from the Senator’s parents with an implicit bargain to “help” steer clients and additional income; a piecemeal acknowledgement of personal but no professional failings; the conflating of personal and professional activities so that the public dimension of one’s profession gets  lost.  Who is there to ask whether the client arrangements in question advanced the public interest as opposed to the Senator’s interests?  Given the implied or express endorsement of a U.S. Senator with an undisclosed personal interest beyond helping a former aide, weren’t such arrangements beneficial for the clients only because of the presumed goodwill and other advantages that might flow to them so long as that senator’s interest in remaining in office prevailed? 
  • The vortex of public action and private indiscretion that sucked in other staffers and even another Senator.  Despite earlier protestations and denials from Senator Ensign and his supporters,  the sense of deja vu is hard to ignore. 

Demonstrating responsibility, both personal and professional, is meaningless without a foundation of ethics, both personal and professional.  The Senator’s situation is the one on today’s front page, but, consistent with the human condition, the foibles and flaws revealed are not exclusive to leaders in Washington or those in public service more broadly.  Nor are they limited to Congress or to public institutions generally. 

While the situations in the public, nonprofit, and public sectors undoubtedly will vary and, by comparison, seem mundane, the headline we should keep in mind remains essentially the same:  Ethics at Issue for All of Us .      

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