When values are a liability
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?
In his book Leading Change, James O'Toole argues for values-based leadership: leading based on values and a consistent display of respect for followers. This paradigm of leadership is not one stressed in business schools, the schools that train our future investment bankers and traders. So while we can look at how leaders at a particular institution have behaved as symptoms of a value-less marketplace, we have to wonder what the root causes of these behaviors are.
What are the gaps in our educational and social curriculum that make it acceptable for some of our most influential business leaders to forget their duty to followers? Where is the business case made for leading based on respect and trust? Have we as a society become so short-term and bottom-line focused that making value-based decisions becomes a liability?
Goldman does need a new business strategy, but so do most of our institutions. I think back to a quote from Robert Greenleaf's essay, The Institution as Servant, where he expounds upon his idea of the leader as a servant, and their institutions as beacons for society as a whole:
"Whereas, until recently, caring was largely person to person, now most of it is mediated through institutions - often large, complex, powerful, impersonal; not always competent; sometimes corrupt. If a better society is to be built, one that is more just and more loving, one that provides greater creative opportunity for its people, then the most open course is to raise both the capacity to serve and the very performance as servant of existing major institutions by new regenerative forces operating within them." -- Archana Ramesh
A vicious cycle of corruption
Goldman Sachs needs to revise its business strategy to include an improved system of checks and balances that offer transparency to their shareholders. Lawmakers are just as responsible for what has occurred, and they are using Goldman Sachs as a scapegoat. Lack of stringent regulations allowed these loopholes to exist. And though self-serving, Goldman Sachs leveraged the system to their best interest. After all, they are in business to profit and that is what they did. To do so by betting against worthless derivatives sold to their clients and then have the American taxpayer bail them out was unethical and unconscionable, but probably not illegal, even if it should have been.
Now after the fact -- isn't it always? -- they are being summoned to Capital Hill to explain themselves. This is proving embarrassing. But under the laws which these acts were committed, I doubt they will be found to have done anything illegal. That was the culture on Wall Street at the time, and Goldman Sachs was just one among many businesses engaging in questionable practices.
Goldman Sachs is being used to quell the anger of the American public who is suffering under the worst economic climate since the Great Depression. It remains to be seen whether Congress will have the backbone to enact sweeping and much needed changes into law. Perhaps, somehow, these lawmakers will be able to establish laws that mandate businesses to do what is morally right even when it is not necessarily illegal. Just maybe this will happen, but I am not holding my breath.
Let me tell you why. There will always be conflict of interest in a capitalist system. Lawmakers need to keep their coffers filled; the more profitable the "Goldman Sachs" of the business world are, the more donations they will get. It is simply a vicious cycle of corruption. -- Taren Cowan
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