The president of Brown University, who for ten years has been a director at Goldman Sachs, issues a no-comment in response to the university’s newspaper.
Simmons wrote in an e-mail to The Herald that it would not be appropriate for her to comment on the situation at this time.
Why is it inappropriate for a director of a company to say something in response to government charges of fraud against it? Did the students ask Simmons whether she supports the company’s press release expressing outrage at the charges and vowing to defend its honor? Does she disagree with that statement? As a director, didn’t she have to review and vet it?
What’s inappropriate is for a leader of a university and a corporation to say nothing to both sets of her constituents (students, stockholders) when the attention of the world is focused on a claim of illegal behavior for which, as a director of the company, she may have to take some responsibility.
At the very least, Simmons needed to confirm her support for Goldman’s official statement in response to the charges. She is a Goldman official. She represents the company.
A University of Maryland law professor comments in the New York Times:
[What’s particularly] galling is the constant refrain from both Wall Street C.E.O.s and former regulators that no one could have predicted the [housing] crisis. However, the S.E.C. allegations are premised on the fact that hedge funds and Goldman Sachs itself were so convinced of cataclysmic failure that they were looking for investment vehicles that would profit each time a homeowner defaulted on his or her mortgage.
In other words, there were competent and smart people making billions because they could foresee the obvious: people with poor credit would not be able to repay their home loans.
In short, it was not that no one knew…
What did Ruth Simmons know?
Did she – as she will eventually say – know nothing?
Then why was she a director of Goldman Sachs? Why did GS pay her many millions of dollars for being a Goldman Sachs director? For ten years?
Another commentator at the NYT asks:
Why have there been no criminal charges? Why did the S.E.C. only name a relatively low-level Goldman officer in its complaint?
Ruth Simmons is a very high-ranking Goldman officer. Eventual criminal, not merely civil, charges will surprise no one. I’d say Brown University needs to start asking itself whether it has a president able to give the campus her full attention.
Or whatever partial attention she’s been giving it. As Pablo Eisenberg asks:
Did it not concern the Brown board that its president was [until recently] spending an inordinate amount of time and attention helping to direct and oversee three major corporations at a time when universities and colleges are themselves under increased financial stress, experiencing a crisis in financial aid and facing serious questions about systemic faculty and staff inequities?
One of the corporations she continues to oversee is now in very serious legal trouble. Through omission or commission, Simmons helped get it there. What is she going to do about that? What is going to happen to her because of that?
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Simmons isn’t the only Goldman Sachs director suddenly struck silent.
William W. George, a Harvard Business School professor who has served on Goldman Sachs’s board since 2002, referred a request for an interview to the company’s press office. His Twitter account, which lauded JPMorgan Chase & Co. CEO Jamie Dimon for his firm’s better-than-expected earnings on April 14, remained silent on the controversy surrounding Goldman Sachs.
George is the author of 7 Lessons for Leading in Crisis.
Lesson #1: RUN CRYING TO THE COMPANY’S PRESS OFFICE
… the list of university leaders settling their greedy asses on corporate boards and drawing big money from them for doing nothing (except cutting into their university time by going to Hawaii for corporate junkets) is very very long; and even though they keep getting caught failing to disclose their several, often conflicted, board seats, these people keep doing it cuz man you don’t know greed and how it can drive you! You can’t hope to understand!
The latest corporate board scandal comes out of already insanely scandal-plagued University of North Carolina system, with its fake classes and shit. Take a place that’s already in deep doodoo and drive it yet farther underground: This has been the mandate of new head guy William Roper, who jest can’t seem to ‘member all the boards – some of whom do business with his institution – on which he has settled his ass. The local lamestream media insists on sticking its nose into his affairs, looking at forms he’s failed to fill out, etc., etc., and he’s pissed – as pissed as Shirley Ann Jackson used to get when people called her out (she had her people call her critics racists). From the height of his ass-cooling dignity Roper has issued statement after statement and you know what? It’ll work. UNC has suffered few negative consequences because it’s a jock-sniffing academic joke; Roper will suffer few negative consequences for his greed and deceit. UNC is what it is and life – in all its glorious scumminess – goes on.
Senator Charles Grassley – echt-American right-wing nerd – and Andrew Ross – left Euro hipster – find common ground in their disgust at the big-money machine New York University has become. Both wonder why a non-profit uses its extensive tax breaks to bleed its students for tuition, underpay its faculty, and give millions of dollars to administrators.
The culture gap between faculty and administration is pretty staggering lately. We’re scrambling to offer unpaid MOOCs; they’re looking for more Helen Dragas and Steve Cohens to put on the university’s board of trustees.
And indeed herein lies the problem, if you ask UD. Ross asks:
“Faculty who don’t necessarily get concerned with governance issues or for whom academic governance is not something that turns them on, these revelations I think turned the stomachs of a lot of people,” Ross added. “Just the scale of the payouts, multimillion dollar loans, multimillion dollar homes that were purchased, and the salaries. They really add up to a package of questions that have led to requests for further investigations.”
Part of the answer to this package of questions involves that board of trustees. NYU’s – like most fancy schools’- is dominated by hedge fund managers and the like. This means that over the last couple of decades the people with whom administrators consort on a daily basis are multimillionaires and even (Steve) billionaires. Larry Summers, Ruth Simmons – their immediate world has been the world of Goldman Sachs, where earning less than twenty million dollars a year is a mark of shame.
It’s not merely that high-ranking administrators these days consort with hedgies; like presidents Summers and Simmons, they often are hedgies, or they sit on the boards of hedge funds.
Trustees have always been rich, of course; but when ascending to an administrative university position now means that your compensation standard rises from six figures to seven or, uh, ten (Steve), you are going to feel compelled to shake down the school for big bucks. Otherwise you won’t be able to live with yourself.
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One practical recommendation for NYU from UD: Book a Greg Mankiw “politics of envy” talk and make faculty attendance mandatory.
While he appeared a grandfatherly academic, Dr. [Sidney] Gilman, 80, was living a parallel life, one in which he regularly advised a wide network of Wall Street traders through a professional matchmaking system. Those relationships afforded him payments of $100,000 or more a year — on top of his $258,000 pay from the University of Michigan — and travels with limousines, luxury hotels and private jets. … Dr. Gilman made a sharp shift in his late 60s, from a life dedicated to academic research to one in which he accumulated a growing list of financial firms willing to pay him $1,000 an hour for his medical expertise, while he was overseeing drug trials for various pharmaceutical makers. … Colleagues now say Dr. Gilman’s story is a reminder of the corrupting influence of money. The University of Michigan, where he was a professor for decades, has erased any trace of him on its Web sites, and is now reviewing its consulting policy for employees, a spokesman said.
[Gilman] has been ostracized by the university, and the consequences are broader still as a debate over the propriety of professors’ receiving payments from financial firms has been rekindled.
“What is the argument for sanctioning your full-time faculty, using your brand name, to advise the financial sector?” said Dr. Garret A. FitzGerald, a cardiovascular researcher at the University of Pennsylvania, who has been outspoken about conflicts of interest. “What’s the public good there?”
Oh pish posh. What’s the public good of Michigan’s president, Mary Sue Coleman, collecting huge sums from corporate boards for doing little other than attending meetings that cut into the time she can devote to the university? Was she distracted by her corporate boarding when she insisted on the catastrophic hiring of Rich Rodriguez?
Colleagues can nod their heads sagely about the corrupting influence of money, but really. When the president of Gilman’s university is as subject to greed as Goldman Sachs executive compensation rubber-stamper Ruth Simmons was, why should Gilman have felt uneasy about his own acquisitiveness?
… begins to assume a notoriety uncomfortably similar to “current Goldman Sachs partner.” One feels a twinge of concern for Barnard College’s president, the latest academic to fall for the hundreds of thousands of do-nothing dollars in personal compensation the place is going to give her just for shedding some academic respectability on the firm’s, uh, activities. (What do you get for going beyond sitting on your ass? What do you get for reading a speech someone wrote for you? “Goldman Sachs paid [ex-Harvard president Lawrence Summers] $135,000 for one speech.” Something for Barnard’s president to shoot for.)
I mean, it’s awkward. Here Barnard’s prez sits on the Goldman board of trustees, but the head of Goldman Sachs has to cancel a talk he planned to give at her school because
Students at Columbia University, across the street from Barnard, had organized a week-long protest against Blankfein called “School the Squid,” which included discussions about corporate greed and power abuse, the student-run Columbia Daily Spectator reported on its website today.
Goldman Sachs, which was the most profitable securities firm in Wall Street history before it converted to a bank in 2008 after the collapse of smaller rival Lehman Brothers Holdings Inc., set a pay record in 2007 when it awarded Blankfein a $67.9 million bonus.
A 2009 article by Matt Taibbi in Rolling Stone magazine labeled the company “a great vampire squid wrapped around the face of humanity.”
Ruth Simmons, another Goldman trustee, got out while the getting was good; but Barnard’s president has just jumped right in… And why not? As Rajat Gupta and Peter Kiernan can tell her, being a former Goldman Sachs partner is pretty much as bad as being a current Goldman Sachs partner. It seems to follow you around.
Barnard College. Judge us by the company we keep.
… sits on the Board of Directors of Goldman Sachs. Bill’s job at Goldman: Doing nothing. He has recently been joined by Barnard president Debora Spar on the Goldman board. Her job: Doing nothing. Ruth Simmons, president of Brown University, has just left the Goldman Board of Directors. Her job: Doing nothing.
[S]ix of …seven [former GS managing directors and partners] said they agreed with [Greg] Smith’s [NYT op/ed] criticism of how the firm has treated clients under Blankfein and Cohn’s management and that current members of the management committee would, too. Even so, they said they don’t expect the board of directors to take action or that anything will change because the firm has made money and outperformed most rivals.
Harvard, Barnard, Brown: Some of our best universities are Goldman-infested. In exchange for hundreds of thousands of GS dollars, some of our highest profile academics sit on their asses there, rousing themselves to approve – as Simmons did – a $68 million dollar bonus for Lloyd Blankfein. “There’s no indication … that Simmons takes her fiduciary responsibilities to Goldman’s shareholders particularly seriously,” wrote Felix Salmon of Simmon’s time at Goldman. He noted she knows virtually nothing about finance, making it absurdly easy for her to be “snowed” by Blankfein.
[GS] should get to work on the board, appointing people who will look hard at managerial business decisions, and won’t allow themselves to be snowed by Lloyd.
Or, as Salmon put it yesterday:
The real muppets, in this story, are Goldman’s board members, who have never had any real control over how the company is run. And, frankly, never will. The most remunerative skill, at Goldman, is the ability to flatter someone into believing that they’re incredibly important and clever and sophisticated, even as you’re getting that person to do exactly what’s in your own best interest. No one rises to lead Goldman Sachs who doesn’t have that skill. And you can be sure that Lloyd Blankfein uses it on the board every time he meets with them.
Everyone commenting on Muppetgate agrees that the board remains useless at best and an enabler of sick personal greed and toxic corporate culture at worst. (You’d think Harvard would be embarrassed that Incurious George promotes Me Heap Big Leader shit like this under Harvard’s name.) How disgusting that the names of some of our best universities are dragged into this mud.
When UD was a tyke, her mother, who bred dogs, took her to many dog shows up and down the east coast. Once, while her mother was gazing at handlers running English Cocker Spaniels round and round and round, UD wandered away and got lost. (What’s the definition of trauma if you grew up in Bethesda, Maryland? Getting lost at a dog show.)
The one thing UD took away from all those shows was a phrase she heard over and over again at them: CLEAN-UP CREW, RING ONE. Or two or whatever. UD seems to have been impressed that a group of people existed whose function was to rush about cleaning up dog shit.
With the soon to be infamous “muppet” letter published in today’s New York Times, corporate clean-up crews are pressing pooper scoopers into service all over the country. Let’s see if we can help them. Here’s the mess in the ring. Here’s what Brown University’s president, until very recently a highly paid member of the Goldman Sachs board of trustees, was in with.
Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.
When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.
Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.
How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence. [Scathing Online Schoolmarm says: Nice bit of humor there.]
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.
These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.
When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.
My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore. [He’d actually have done better not to list the particular accomplishments – it edges toward boasting, and humility is the idea here.] [Update: See? A lot of people are having fun with this.]
I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.
Hokay, so what’s corporate clean-up going to do?
Oh, you know.
So do I.
First, it’s going to impugn the guy. Secret resentments; he was close to retirement; he was increasingly irrelevant and he knew it so he thought he’d take a last potshot. (Damn! Traitors everywhere.)
And – if that’s how he feels, why did he stay so long? Cashing in baby, cashing in, just like everyone else! Do you know how much money he made last year? Twenty, fifty mil, maybe? If he’s so pure, we await his return of the cash…
Stuff like that.
And anyway! Muppets is a term of endearment.
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Notice that one thing his conscience couldn’t take anymore was looking college students in the eye and telling them Goldman was a good place to work when he knew they weren’t exactly going to be turned into model citizens.
Well, he can stop worrying about that. These students come from universities whose boards of trustees and presidents have been in bed with Goldman and Goldman veterans for a long time. So…
Muppets of Barnard College! I give you your president, Debora Spar, Goldman Sachs board of trustees! Goldman will be giving her around $500,000 a year to do … pretty much what Brown University’s Ruth Simmons did. Pretty much nothing. Pretty much rubber stamp hundreds of millions in compensation each year for Goldman executives.
See, she’s a muppet too.
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Update: Live-blogging the Muppet Show:
TO SAVE GOLDMAN SACHS, LLOYD BLANKFEIN MUST GO
shouts a headline that just appeared at Forbes.
B-b-but…! What happens to Barnard College in that case? The reason its president got on the Goldman board is that Blankfein’s wife – until recently herself a member of Barnard’s board – seems to have put her there. This is from 2011:
Chairman and Chief Executive Officer Lloyd C. Blankfein’s wife, Laura, is a Barnard College alumna and is listed on the school’s website as a member of the board of trustees. She has resigned that post, Stephen Cohen, a spokesman for Goldman Sachs, said today. The Lloyd & Laura Blankfein Foundation donated $50,000 to Barnard College in fiscal 2010, which ended Jan. 31, 2010, and $25,000 in the previous year, according to the nonprofit’s federal tax filings.
You put me on the Barnard BOT; I put you on the Goldman BOT. And look at those numbers, will you? Blankfein’s been making around fifty million dollars in compensation each year for many years. Can you believe he and his wife were willing to part with – let’s do the math – $75,000 for Barnard? Who said greed? Shut up about greed!
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Favorite headline so far:
Goldman Sachs Exec Suddenly Realizes His Company Is Evil, Quits in NYT Op-Ed
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G is for Goldman, it’s good enough for me!
Be proud, Barnard muppets, of your very own Cookie Monster!
The real muppets, in this story, are Goldman’s board members, who have never had any real control over how the company is run. And, frankly, never will. The most remunerative skill, at Goldman, is the ability to flatter someone into believing that they’re incredibly important and clever and sophisticated, even as you’re getting that person to do exactly what’s in your own best interest. No one rises to lead Goldman Sachs who doesn’t have that skill. And you can be sure that Lloyd Blankfein uses it on the board every time he meets with them.
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We promise it’ll never happen again: Andy Borowitz writes a Lloyd Blankfein response.
At Goldman, we pride ourselves on our ability to scour the world’s universities and business schools for the finest sociopaths money will buy. Once in our internship program, these youths are subjected to rigorous evaluations to root out even the slightest evidence of a soul. But, as the case of Mr. Smith shows, even the most time-tested system for detecting shreds of humanity can blow a gasket now and then. For that, we can only offer you our deepest apology and the reassurance that one good apple won’t spoil the whole bunch.
Fifty thousand! FEEEEFFFTEEEEE TAOZAND!
Do you know how much money Lloyd Blankfein of Goldman Sachs earns every, I dunno, minute? His mere bonuses in the last few years have ranged between fifty and one hundred million dollars.
FIFTY THOUSAND DOLLARS? Him AND the Missus?
Lawdy. Maybe he figures putting Barnard’s president on the Goldman Sachs board is like giving the school a lot of good stuff, but Debora Spar should probably talk to Ruth Simmons about that one. (Upside: It pays you insanely well for doing almost nothing. Downside. Simmons has announced her resignation from Brown. She will be busy with Goldman litigation no doubt.)
Blankfein recently blanked on a speech he was supposed to give at Barnard. Word is he cancelled because of School the Squid Week, planned to coincide with his appearance. (It’s a reference to the vampire squid metaphor in Matt Taibbi’s famous Goldman Sachs article.) Plus there’s the Occupy Wall Street thing down the block.
It’s all getting a lot of press attention — as will Spar herself when students discover the sorts of colleges their president presides over.
But anyway. Predatory capitalism is certainly interesting, and worth studying, and Barnard students – plus their president – have front-row seats.