Stephen Foley: The nun, the merchant banker and a question of corporate ethics

 

US Outlook Nobody mentioned the name Greg Smith, though it is barely two months since the London-based trader quit Goldman Sachs citing a "toxic" culture where clients were regarded as "muppets" to be ripped off wherever possible.

Shareholders are, on the whole and by definition, a supportive bunch. None the less, it is surprising that they didn't want to test management on whether Mr Smith's portrayal might have some truth, and what the bank is doing to contain the reputational damage. Instead, the Goldman Sachs meeting, like most on the corporate calendar, has become a showcase for interest groups pushing "soft issues" such as environmental and social responsibility. These are vital issues, but it is odd that they overwhelm matters that are more pertinent to the share price on the one occasion in the year when smaller shareholders have access to management.

Goldman's stock is trading back at 2005 levels, having given back most of the bounce they got when the panic of 2008 subsided. That is because regulators across the world are closing off doors to easy profit, in the name of the safety and soundness of the financial system. In the main, this involves bringing new transparency to complex financial products – the ones where you can hide costs and dangers from the "muppets" on the receiving end – and pushing to eliminate short-term gambling from government-insured banks.

Wall Street brought this on itself, and incidents like the Greg Smith resignation and JPMorgan Chase's $2bn-plus loss in its proprietary trading arm embolden regulators and politicians further.

In fairness, there were questions in these areas. One shareholder asked if the JPMorgan blow-up had prompted Goldman to examine its own risk management. (Answer: "We are always examining our risk management practices.") Another was pushing for policies to force former employees to hold their Goldman stock for many years after they leave, to tie them to the consequences of their actions. (Answer: "That would put us at a competitive disadvantage in hiring.")

Sister Barbara Aires, representing a Catholic organisation that has Goldman shares, pushed Lloyd Blankfein, chief executive, to move faster to implement the 39 reforms promised by Goldman's business standards committee in the wake of the credit crisis. The eight outstanding items largely refer to the bank's activities in structured products, the very instruments where short-termism and greed overwhelmed Wall Street's responsibilities to clients, and where Goldman promised to try to consider the societal wisdom of each fancy new instrument. She got a charming response, but no answers. "You sound a lot like management at Goldman Sachs," Mr Blankfein told her, to reassure her that he was working on it. "Do you want to hire me?" Sister Barbara responded.

"I don't think we can outbid your current boss," was the chief executive's response.

The exchange raised a laugh, and sent everyone home happy, but it is a shame that these reforms and the matters raised by Greg Smith were not probed further. Shareholders ignore these cultural issues at their peril.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
News
people
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?
Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

Finally, a diet that works

Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced