Goldman Sachs show the emptiness that is often associated with Transparency

Transparency is a very common word in the business world.   In general transparency is about disclosure of information or, more precisely, the perception of disclosure.   The problem is it can have multiple meanings and at times can be used in way that is meaningless.  So when Goldman Sachs released a 63 page report based on a nine month investigation of its own business practices, the term transparency was used.  Goldman Sachs was at the center of the global financial meltdown and was grilled by Congress over how it made money by having its clients lose money (Goldman bet against products it was selling to clients.  As one financial expert noted,  “Having an obligation to your shareholders as an investment bank to remain profitable means that you’re going to be making money off of your clients, and so there is an inherent conflict” (  The point is that there is a built in conflict of interest when a company can make money by having its clients lose money.

The Goldman Sachs report was designed to give greater insight into how the company will operate and reflects changes made from past practices.  Here is a statement from the Report of the Business Standards Committee January 2011:

“At our Annual Meeting of Shareholders on May 7, 2010, our Chairman and Chief Executive Officer,        Lloyd C. Blankfein, announced the firm’s intention to create the Business Standards Committee to conduct an extensive review of our business standards and practices. The Committee’s mandate was to ensure that the firm’s business standards and practices are of the highest quality; that they meet or exceed the expectations of our clients, other stakeholders and regulators; and that they contribute to overall financial stability and economic opportunity. The Committee has operated with oversight by the Board of Directors, which established a four member Board Committee to provide additional focus and guidance. In addition, the firm engaged two consulting firms to provide independent advice to the Business Standards Committee.

The scope and intensity of the Committee’s eight month review have been significant, encompassing every major business, region and activity of the firm. We made 39 recommendations for change spanning client service, conflicts and business selection, structured products, transparency and disclosure, committee governance, training and professional development and employee evaluation and incentives. These recommendations have been approved by the firm’s senior management and Board of Directors and implementation has already begun” (

Talking about what you do is transparency, technically.  As the New York Times noted, “The greater detail is part of a push by Goldman to be more transparent after criticism that it has put its own interests ahead of those of clients. The report, which follows a nine-month internal study of its operations, is aimed at bolstering internal controls, improving transparency and burnishing its reputation.  But whether the report will result in any meaningful change or give investors a deep look inside Goldman’s opaque trading operations remains an open question, according to one analyst” (

While the report is being releases, Goldman Sachs has been working with Facebook on stock sales.  The Facebook stock sales indicates Goldman Sachs still has problems with conflict of interest and the desire to make their money outweighs their desire to help their clients make money.  Moreover, Goldman Sachs is showing a continued willingness to violate the intent but not the letter of regulations.  A BusinessWeek article noted,  “In the Facebook deal, Goldman Sachs is using a special purpose vehicle to bundle client investments into a single place, helping the Internet company skirt securities regulations that require any company with more than 499 investors to meet SEC reporting requirements. Comedian Jon Stewart, discussing the deal on “The Daily Show” yesterday, quipped “Oh Goldman, is there any regulation’s intent you can’t subvert?” (

The larger issue is what constitutes transparency?  Many managers feel that simply disclosing information makes them transparent.  However, transparency is about allowing stakeholders to see inside the organization.  So we must consider what it is that stakeholders want to see.  Even with the Internet, significant parts of organizations in general are opaque rather than transparent.  Stakeholders should be the final arbiter of transparency.  If stakeholders do not get to see the parts of the organization they want to see, then the organization is not transparent.  Part of transparency is meeting the information demands of stakeholders.  Simply releasing information and claiming it is transparency does little to benefit stakeholders or help advance transparency as a meaningful concept.  Instead, people react to simple information dumping as transparency with comments such as this: 

“It’s mostly PR, which I guess is relevant because they live in an increasingly regulated world, so they need to keep PR on their side,” said Benjamin Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which manages about $900 million. “I don’t think it changes anyone’s opinion of them” (

Here are the principles stated in the report:

The Goldman Sachs Business Principles

Our clients’ interests always come first.

Our experience shows that if we serve our clients well, our own success will follow.

Our assets are our people, capital and reputation.

If any of these is ever diminished, the last is the most difficult to restore. We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard.

Our goal is to provide superior returns to our shareholders.

Profitability is critical to achieving superior returns, building our capital, and attracting and keeping our best people. Significant employee stock ownership aligns the interests of our employees and our shareholders.

We take great pride in the professional quality of our work.

We have an uncompromising determination to achieve excellence in everything we undertake. Though we may be involved in a wide variety and heavy volume of activity, we would, if it came to a choice, rather be best than biggest.

We stress creativity and imagination in everything we do.

While recognizing that the old way may still be the best way, we constantly strive to find a better solution to a client’s problems. We pride ourselves on having pioneered many of the practices and techniques that have become standard in the industry.

We make an unusual effort to identify and recruit the very best person for every job.

Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best firm.

We offer our people the opportunity to move ahead more rapidly than is possible at most other places.

Advancement depends on merit and we have yet to find the limits to the responsibility our best people are able to assume. For us to be successful, our men and women must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.

We stress teamwork in everything we do.

While individual creativity is always encouraged, we have found that team effort often produces the best results. We have no room for those who put their personal interests ahead of the interests of the firm and its clients.

The dedication of our people to the firm and the intense effort they give their jobs are greater than one finds in most other organizations. We think that this is an important part of our success.

We consider our size an asset that we try hard to preserve.

We want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, the intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.

We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs.

We know that the world of finance will not stand still and that complacency can lead to extinction.

We regularly receive confidential information as part of our normal client relationships.

To breach a confidence or to use confidential information improperly or carelessly would be unthinkable.

Our business is highly competitive, and we aggressively seek to expand our client relationships.

However, we must always be fair competitors and must never denigrate other firms.

Integrity and honesty are at the heart of our business.

We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.

Questions to Consider

1. How do principles stated in the report seem to match the actions in the Facebook sale?

2.  What is the danger to PR of calling this action by Goldman Sachs “PR?”

3.  Who should get to evaluate whether or not an organization is being transparent?  Explain the rationale behind your choice.

4.  How can public relations help with transparency?

5.  What is conflict of interest and why is conflict of interest such a big concern in public relations?

6.  Why would someone feel the report was all show?


One Response to Goldman Sachs show the emptiness that is often associated with Transparency

  1. […] Goldman Sachs show the emptiness that is often associated with … […]

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