As Jon Stewart would say, the Goldman resignation letter is comedy gold — see, for example, here. But once we’re done laughing, we’re left with some questions: Has the culture has changed on Wall Street, and if it has, why? Have things gotten worse, or is this the kind of change you’d expect to see in a rapidly evolving industry?
I’d guess some of each — things never stay the same — but here are a couple thoughtful comments about how the investment banking business has changed over the last thirty years. The first comes from Henry Kaufman, our friend and benefactor, who argues that civility on Wall Street has declined, and that the root cause is the move from partnerships to publicly traded corporations. He notes that when he was made a partner at Salomon, he inherited a share of Salomon’s $2b liability, which reduced his taste for risk significantly. Lots more at the link, I recommend the whole thing.
The second comes from Dick Sylla, who makes a similar point. Dick notes (lightly edited): “Self-interest — greed, if you like — did not arrive at Goldman Sachs when Greg Smith joined the firm in 2001. What changed shortly before Smith signed on was that Goldman switched from a partnership to a corporation, the last of the major Wall Street investment banks to do so.” He suggests that partners have more of a long-term stake in the firm (Henry’s $2b liability), which may make them less likely to engage in activities that damage the firm’s reputation.
Have things gotten better or worse? I’ll leave that for you. Comments welcome.