Goldman Sachs Op-Ed Doesn't Scratch the Surface of Corruption
This week people have been buzzing about Goldman Sachs executive Greg Smith's high-profile resignation from Goldman and his description of the way that company's ethics and morals have declined over the last decade and more, especially under current CEO Lloyd Blankfein.
But Smith's revelations aren't really news at all, and the moral decline he describes at Goldman has been replicated throughout our corporate culture. Behavior at Wall Street firms like Goldman may have been more overtly criminal, but the shift from respect for the customer to the desire to rip customers off is pervasive and insidious.
Wall Street has, of course, been the epicenter of this behavior. Years ago it was reported that traders at Morgan Stanley used to get off a phone call and gleefully shout “I ripped his face off!” - about their own clients - after successfully selling them what they knew were garbage investments. The surprise isn't that Goldman Sachs encourages its employees to mislead clients and put its own interests above theirs – the surprise is that anybody is surprised.
We should know better.
Capitalism has always been based in part on predatory behavior. But a series of progressive reforms that began more than a century ago managed to bring the predators among us under control. Laws and regulations were a key part of that control, but a four-decade long conservative crusade against them has brought us to the point where Democratic Presidents can echo the anti-regulatory rhetoric of the right without fear of reprisal from their own base.
We need to restore the respect that regulations and those who enforce them have earned over their decades of service to the country. But there needs to be even greater change – cultural change – before we can stop the kind of behavior that Smith described in his editorial. We need to end the culture of predation and stigmatize the corrupt business leaders who are tearing our society down.
It's true that Blankfein's a particularly egregious example of the culture of predation. But there isn't an executive on Wall Street whose company hasn't done things he should be ashamed about – and shunned for. And many of them should be under criminal investigation right now. Instead they're attending plush fundraisers with leaders from both parties and whining to subservient journalists that today's coverage of them isn't universally congratulatory. These guys don't want reporters, they want praise-singers like the ones that flattered ancient princes – and more often than not they get them.
But the culture of predation goes way beyond Wall Street. It's all around us. Here's an example from my own corporate life: While I was working in the insurance and risk management area back in the 1990s, a group of us were sent to one of those offsite 'bonding' get-togethers that were so popular at the time.
As was the custom in those days, slightly hippie-ish baby boomers (usually ex-teachers or ex-social workers) were hired as 'facilitators' to get us 'thinking outside the box' (I used to say “I have ADD; I lost the box,” but they made me attend anyway.) This typically involved 'team-building exercises' like making a house out of string while blindfolded.
(Yes, that was one of our exercises.)
In one of the sessions we were encouraged to come up with an innovative idea for our own work area. To stimulate our 'creative juices,' we were given three examples from the real business world. One of them will be familiar to any man who shaves: Our granola-eating facilitators enthusiastically told us how the Gillette company managed to send its revenues sky-high by selling their razors at a low cost and then charging an arm and a leg for the blades. Gillette constantly changes its razor design so that lower-cost competitors can't sell blades to its customers.
Millions of American men have contemplated spending the rest of their lives looking like ZZ Top, just because of the Gillette company. Gillette has a stranglehold on the razor market and uses it to shaft its customers any chance it gets. The sleazy, anti-consumer Gillette strategy has even been adapted by formerly decent companies like Hewlett-Packard, who under prominent Republican Carly Fiorina because selling cheap and unreliable printers whose cartridges constantly run out of ink and cost a fortune to replace.
In Corporate America, however, that's not called sleazy behavior. It's called “thinking outside the box.”
The second example was that of a public telephone company in some Midwestern city that decided it could make more money by making it unpleasant to use its pay phones. So, as our Birkenstock-wearing guides told us gleefully, some young executive suggested putting a heavy weight in the receiver and slanting the shelf underneath the phones so that you couldn't put anything there without having it fall off. Pretty soon they were all doing it. (Now pay phones are a thing of the past. It's like they say: Karma is a bitch.)
I forget the third “innovation,” but it was equally repellent. But what I do remember is that only two or three of us in the group exchanged looks of disgust. A few other people were as excited as the group leaders, and the rest didn't care one way or the other.
What's the point of bringing this up? That the bond between business leaders and customers has been broken, and that businesses aren't being punished for it. They're not being punished by loss of customers or social disapproval, and when they break the law they're not being punished with jail time.
People have come to expect that the businesses which are supposed to serve them will do everything in their power to rip them off instead – and that nobody inside or outside of government will do anything about it. When people buy shoddy products and call the manufacturer for help they've come to expect endless wait times, followed by soul-killing robotic interactions with underpaid script-driven hirelings. When they open their bank or credit card bills they expect to be slammed with unadvertised and unaffordable add-on charges.
And they're rarely disappointed.
The Democrats' attempts to change this culture have been tepid at best (with the possible exception of the Consumer Financial Protection Bureau, which will only be as good as its Presidentially-appointed director). But even those tentative steps have been met with a firestorm of reaction, which too often is met with offers to water the reforms down even more.
What can be done? For one thing, computer owners can boycott companies like Hewlett-Packard, too. And we can explain why. For another, the men of America can boycott companies like Gillette. If we all wind up looking Amish it'll be worth the effort. Because you know what? The Amish are scrupulously fair and honest in their business dealings.
You can't say that about bank executives like Lloyd Blankfein at Goldman Sachs, or any of the other CEOs on Wall Street. And you can't say that about most other corporate CEOs these days, either. Sure, there are notable and admirable exceptions. But we need a movement to clean up our entire corporate culture. Maybe we could call it “Beards, Not Banks.” And along with it, we need to restore our nation's respect for the laws and regulations that protect us from bandits, rascals, and thieves - and for the people who enforce those laws.
As long as we reward bad behavior with our money and our respect, things will only continue to get worse.