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Scott DeRue
Leadership professor

Scott DeRue

Scott DeRue is Assistant Professor of Management and Organizations at the University of Michigan Stephen M. Ross School of Business. With Maxim Sytch, he created the student-driven Leadership Seminar discussion group.

Innocent until proven guilty

Q: Goldman Sachs promises to put customers' interests first. At the same time, Goldman was able to avoid serious financial trouble by hedging positions in ways that placed bets against clients. Do Goldman's leaders need a new business strategy, or do they need to just do a better job at explaining their business to regulators and the public?

The real question is this: Did Goldman Sachs break the law? If yes, the firm should be punished to the full extent allowable by the same laws the firm (maybe) broke in the first place. But let's allow the legal process to unfold before drawing conclusions about the legality of Goldman Sachs' actions. To Senator Levin and others who are using their pulpits to shape public opinion before all of the facts come out, shame on you.

If I was a betting man, my money is on the idea that Goldman Sachs was within the letter of the law, but by establishing hedging positions against its own clients, the firm has offended our collective moral conscious. If so, this is a wonderful example of why leadership is not simply "doing your job well." In fact, leadership is not a role, it is not a right, it is a responsibility.

Goldman Sachs' executives did their jobs well (assuming their actions were legal of course). But if their actions put in place a series of moves that first created the bubble, and then stood to profit from the burst of that bubble, then those executives failed to live up to the responsibility they have as leaders of global institutions. When you lead an institution with the size and scale of Goldman Sachs, you must realize that you have a responsibility that goes well beyond your shareholders. As Darden professor Edward Freedman has pointed out, you are serving a group of stakeholders that also includes investors, governments, customers, suppliers, and communities.

Leadership is not simply about doing things right. Leadership is about doing the right thing. Goldman Sachs mostly likely did things right, but it is becoming increasingly clear that the firm did not do the right thing.

By Scott DeRue

 |  April 27, 2010; 11:18 AM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: Being 'legal' doesn't make it 'right' | Next: 'Customer interests first' - really?

Comments

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I doubt that I would play golf with the Goldman Sachs executives since it requires that one be honest and gentlemanly! I doubt that any of the Goldman executives would call a penalty on themselves with money on the line! No thank you, if this is business than I would rather have no part of it.

Posted by: Mala10 | May 3, 2010 8:22 AM
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So you teach what, `how to be a weasel 101'?

Please keep us up to date on your other bets. When you get time a list of lottery numbers you like might also prove useful.

Posted by: Nymous | April 28, 2010 1:53 AM
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It sounds like Goldman is where your students end up; armed with shaky morality and ethics they learn in your classroom.

It is quite obvious that the so called "top business schools" such as yours are the ones producing these shameless arrogant goldman executives with greed as their core value.

SHAME ON YOU MR.DeRue.

Posted by: whitetrash1 | April 27, 2010 3:36 PM
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Mr. DeRue:

"Shame on you." ... are you kidding me?

So I suppose with your mixed up logic Patrick Fitzgerald should never have questioned (or tried to) those responsible for the Valerie Plame affair. Karl Rove should never have to come clean about a certain politicization of the Department of Justice - a flagrantly illegal act that somehow got covered up.

I'm sorry but you need to understand that Mr. Levin has a responsibility to raise a flag in this tawdry affair of Goldman Sachs ruining our economy for the profit of a few people. I shouldn't have to point it out but his questioning is how justice gets dealt out. Do you really insinuate that some judge sitting in his or her chambers is going to prosecute when no one has brought the case to their court?

Begin to teach honesty in your classes and enhance your life and your students' as well. Thank you.

Posted by: Saveus2 | April 27, 2010 12:42 PM
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Mr. DeRue:

"Shame on you." ... are you kidding me?

So I suppose with your mixed up logic Patrick Fitzgerald should never have questioned (or tried to) those responsible for the Valerie Plame affair. Karl Rove should never have to come clean about a certain politicization of the Department of Justice - a flagrantly illegal act that somehow got covered up.

I'm sorry but you need to understand that Mr. Levin has a responsibility to raise a flag in this tawdry affair of Goldman Sachs ruining our economy for the profit of a few people. I shouldn't have to point it out but his questioning is how justice gets dealt out. Do you really insinuate that some judge sitting in his or her chambers is going to prosecute when no one has brought the case to their court?

Begin to teach honesty in your classes and enhance your life and your students' as well. Thank you.

Posted by: Saveus2 | April 27, 2010 12:33 PM
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