On May 2 this year, Lloyd Blankfein, the CEO of Goldman Sachs, the gigantic Wall Street bank, was interviewed on CNN by Fareed Zakaria (his show is Global Public Square). Towards the end of the interview, Blankfein set up a striking distinction between the two publics of Goldman Sachs, as he saw them, and the ethical standards relevant to each public. The exchange is worth quoting in full:
ZAKARIA: We're back with the CEO of Goldman Sachs, Lloyd Blankfein. And finally, when George W. Bush tried to persuade Hank Paulson to become secretary of Treasury, as you know, he tried a couple of times and finally, he got Paulson to agree. It was a great coup to have gotten the chairman of Goldman Sachs, the most storied name in finance, to come to his administration and now, here you are with a very different reputation, particularly in the public's eyes. Do you think you can right, do you think that a few years from now, this will all have passed and Goldman Sachs will still be regarded with the same kind of awe and admiration it was or is that world over?
BLANKFEIN: No, no, no. I have to regain, help the firm regain and this is something that's shared by all our partners and employees. We have to regain the trust of the public. We have no choice. We can't survive without people thinking well of us because at the end of our -- our business is a confidence business. Now, I will say that the people that we deal with, that know us best, our core constituency group are employees. Our shareholders, our clients, have been very, very supportive . They know the firm. They know the essence of who we are and frankly, I think we still enjoy a reputation with those -- a good reputation with those key constituent groups.
I think it's the people that are more remote from the real culture and real purpose and real social impact of Goldman Sachs in its financing activities, advisory activities, the way we manage our money, the way we make markets in difficult conditions for the benefit of our clients, I think those groups that know us, frankly, have been quite supportive even in what these challenging times for us. But I can tell you in the past, those were the only groups we had to appeal to. We were an institutional firm. We had no consumer businesses, no branches on street corners. We didn't have to engage with the broader public.
That, for sure, has changed. And when your public has met us, I have to confess, the public hasn't liked what it's seen in the context of this upheaval in finance and the perception of our role in it. And that's something we're going to have to work on with them and that's going to cause us to have to exercise a lot of muscles that we don't have very well developed because our business doesn't cause us to engage directly with individuals.
The other day, on the Charlie Rose Show, I heard Andrew Sorkin of the New York Times make the same distinction, surprised regarding the extent to which the denizens of Wall Street seem pretty relaxed about conduct or ways of doing business that the general public finds outrageous. And around the world the morality or amorality of the world of bankers is clashing with the ethical demands of broader political communities.
The amorality of global finance is striking. It is a world of tough, ruthless 'masters of the universe'. Dog eats dog and what is wrong with that? It is a Hobbesian jungle, only the fittest survive. Conflict of interest? Who cares? Winning is everything. If it turns a fee, adds to profit, that is what matters.
Let's ask: Where is this amorality from? As I was mulling this piece, a colleague sent me an article published in 2005 in the journal of the Academy of Management Learning and Education. Titled 'Bad Management Theories Are Destroying Good Business Practices', the author, Sumanthra Ghoshal, denounces some of the values and practices of the top business schools, saying trenchantly:
"By propagating ideologically inspired amoral theories, business schools have actively freed their students from any sense of moral responsibility." (p.76)
And that is probably true, although I am sure there are more fundamental and unrestrained human instincts at work as well.
Well, now the amorality of global finance is running right into the moral force of public opinion. That is why Blankfein of Goldman Sachs was talking to Zakaria about having to exercise muscles they don't have in order to react to public opinion. He is right to be concerned. A recent opinion poll by NBC/Wall Street Journal taken May 6-10 found that Wall Street is incredibly unpopular, with Goldman Sachs having an approval rating of just 4 per cent.
Public outrage has already had an impact on policy: political leaders in the US and Europe are freely slapping tough new regulations and levies on global finance that would have been unthinkable before the current financial crisis and the public outrage occasioned by the amorality and recklessness of the bankers. [See:'Senate vote exposes Wall Street impotence']
And that is the real point I want to make: that public opinion - or what Jeremy Bentham calls the moral or popular sanction - is a powerful force for accountability. As I argued in an earlier post on the humbling of the golf superstar, Tiger Woods, once the exposure of malfeasance becomes public knowledge, and free, plural and independent media systems pick it up, public debate and discussion ensues,rages even, and public opinion steadily crystallizes. Once that happens, and the judgement of the Public Opinion Tribunal is against the individual or the institution, the consequences are real. Those consequences can sometimes be devastating ...as Tiger Woods found out, and as the titans of global finance are now finding out.
Photo Credit: SEIU International (on Flickr)