Former Goldman Sachs partner calls on board to act


So what responsibility does the Goldman Sachs board have in the wake of the Greg Smith resignation and the Kinder Morgan-El Paso conflict of interest controversy?

Former Goldman Sachs partner Jacki Zehner writes on her blog about Greg Smith: "These are very serious accusations from a credible person in my view and I hope it does indeed provide a 'wake-up' call to the board of directors. It is their responsibility to ensure that promotion and compensation decisions are not divorced from peer reviews and customer feedback. It is their responsibility to ensure that traders, and especially ones who do not have the best interests of clients in mind, do not dominate the firm. It is the board that is accountable to the shareholders and before they take another paycheck, I hope they ask a heck of a lot of questions and get honest answers. If those answers do not reflect the kind of behavior reported by Mr. Smith, then they would have done their job, this story will fade, and Goldman will go about its business for another 143 years. If the answers are the opposite, heads should roll."

It would appear that more than a few former employees and partners agree that there was substance to Smith's op-ed piece. They mainly disagree with the public dialogue he chose to start. Zehner retired from Goldman Sachs all the way back in 2002 and she acknowledges that the culture has likely changed. There were always conflicts but perhaps they were managed better. Relationships mattered more. Trust was not a laughable concept.

Today, trading is much more rapacious, a zero-sum game-theory exercise in which alliances are fleeting; interests may align for one trade but that's about it. You are constantly on guard. You assume the other side is working an angle. You're not about to be the pansy. For any trading outfit, clients that do not approach the business in this fashion are easy picking, that is to say, coveted. They will be taken out for lavish dinners. Some clients learned this the hard way.

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