Goldman Sachs Ethical Failings


Institution Affiliation:

Goldman Sachs ethical failings

According to Parboteeah &amp Cullen (2013), there are a number ofparadigms of moral philosophies. Despite the fact that no singlephilosophy is accepted by all as the universal one, there arespecific principles and values that are used to differentiate rightfrom wrong. These principles form the basis of conflict solvingbetween individuals and organizations. These guidelines, providedirection for determining how best to settle disputes without leadingto extra conflicts. Therefore, it is important for an organization topromote ethics within its structure, and ensuring that every memberupholds the same. Unethical conduct can hurt businesses in more thanone ways, tarnishing the image and public perception, and as such,leading to failure. For instance, Greg Smith, having not beensatisfied by Goldman Sachs’ ethical standards, wrote to the NewYork Times expressing his dissatisfaction. This paper demonstratessupport for Smith’s actions and looks at the importance ofupholding ethics in business organizations.

Mr.Smith was occupying a top management seat at Goldman Sachs, being thehead of the United States equity derivatives business in Africa, Asiaand Europe. As such, he was responsible for a number of businessoperations, and given the geographical extent that he was heading, alot was in stake, in terms of organizational culture. However, hisdissatisfaction and outcry was astounding, given that not many peoplein such management positions have ever done the same (Owles, 2012).His outcry put the company’s hold on the clients on the edge.Without clients, running out of business is eminent. However, it isunethical to continue being in business without right policies tohelp serve the clients satisfactorily. In the modern business world,ethical issues force people to take extra-ordinary steps that providesolutions. The step taken by Smith was right. In addition, there area number of justifications to that.

Accordingto the Ethics Resource Center (2011), a number of specific types ofobserved misconducts affect modern organizations. These behavioralproblems include misuse of company time, lying to employees,discrimination and conflict of interest. In the Goldman case, Smithcited lying to employees, conflict of interest and lying to outsidestakeholders, who include the clients. According to the New YorkTimes, Smith quit the job laying out concerns that “Goldman’sculture had gone haywire, putting its own interests ahead of itsclients” (Craig &amp Thomas Jr., 2012). According to Parboteeah &ampCullen (2013), part of the responsibilities of any organization is toensure that they pay attention to the need of the customers and toavoid conflicting stakeholder’s interests. This is so because ithelps the organization to avoid having to lie to the clients andother stakeholders, which is squarely unethical.

Goldmanclearly failed to institutionalize business ethics. Parboteeah &ampCullen (2013) identify three dimension of institutionalization. Theseare mandatory boundaries, core practices and voluntary practices.Whist the first two are externally imposed and documentedrespectively, voluntary practices are part of the organization’sbeliefs, values and other voluntary contractual obligations, whichare to ensure that business is conducted ethically. Philanthropy ispart of the voluntary practices. However, according to Smith’sclaims, Goldman failed to ensure that they instilled an ethicalculture, which if they did, they would otherwise have been moreresponsible in serving their clients. According to the New YorkTimes, Goldman’s clients complained that they were gettingincreasingly frustrated with a shift in recent years to“profit-above-all” mentality (Craig &amp Thomas Jr., 2012). Thecompany duped some clients back in 2010 into selling moorage securityproduct, which in truth, was being bought by Goldman’s otherclient. Clearly, this was a clear demonstration of lack of ethics inbusiness, which forced Smith into resignation.

Smith’saction brings to issue the matter of relationships and business.Parboteeah &amp Cullen (2013) say that of the most important areasof modern business is building effective relationship. Two majorelements, stakeholder framework and corporate governance define this.The stakeholder governance structure helps in monitoringstakeholder’s needs, values and expectations, while the corporategovernance structure is the formal system of keeping accountabilityand ethical conduct in control. As reported by the New York Times,Goldman failed to uphold positive relationships in business, byensuring that the organizational culture promoted ethical stakeholderengagement and responsible corporate governance. By duping theclients and misguiding them, the organization failed to addressethical issues in business, and it was right for Smith to part wayswith them and put the complaints on air.

GregSmith’s resignation and consequent exposure of Goldman Sachs’ethical shortcomings is no question one of the most significantrevelations of business failures in many modern establishments.Despite the rebuttal attempts of the claims by the company’s topmanagement, evidence from a number of sources demonstrated that thecompany had indeed failed on its ethical conduct front. The questionof organizational culture will regardless continue to persist,especially in such times when companies are undergoing transition inmanagement and finances. However, it is important to recognize anduphold positive business ethics, as failure is inevitable if the sameis overlooked.


Craig, S. &amp Thomas Jr., L. (2012). Public rebuke of culture atGoldman opens debate. New York Times (March 14 2012).Retrieved on 5 July 2015 from:

Ethics Resource Center. (2011). National Business Ethics Survey:Workplace Ethics in Transition. (Arlington, VA: Ethics ResourceCenter, 2012), 39.

Owles, E. (2012). Reacting to Goldman Executive’s resignationletter. New York Times. (14 March 2012). Retrieved on 5 July2015 from:

Parboteeah,K.P. &amp Cullen, J.B. (2012). Business ethics. New York, NY:Routledge.