Practical analysis for investment professionals
05 November 2012

Greg Smith: Whistle-Blower or Disgruntled Employee?

Greg Smith, a former executive director and vice president at Goldman Sachs, caused a stir this March when he resigned from the firm via an op-ed in the New York Times. Although the article described the firm’s culture as “toxic and destructive,” and Smith lamented “how callously people talk about ripping their clients off,” many critics thought he provided surprisingly few concrete examples of wrongdoing at the firm.

Thus, when Smith’s tell-all book, Why I Left Goldman Sachs, was published last week, reviewers were doubly harsh about the lack of a big reveal. Dominic Rushe, writing for The Guardian, described the book as largely “a rehash of Goldman’s recent troubled history that could have been done from newspaper reports.” Frank Partnoy, a former derivatives broker who teaches law at the University of San Diego, told Anderson Cooper in a segment on 60 Minutes, “I think people at Goldman Sachs will breathe a huge sigh of relief. I think they’ll read this book and say, ‘I thought there were going to be significant allegations of fraud, and there aren’t.'”

In a blog post related to that much-discussed 60 Minutes segment (which you can watch below), Margaret Heffernan asked, “Would you dare to hire Greg Smith?” Lamenting the dire future she sees for Smith’s career, she argued that whistle-blowers are “committed loyalists” who shouldn’t be demonized by their employers.

Whether Smith is rightly depicted as a whistle-blower — or, as others have argued, an aggrieved former employee — Smith has repeatedly avowed his affection for Goldman Sachs, both in his book and to the press. “This may be hard for people at Goldman Sachs to understand, but I loved the place,” Smith told Anderson Cooper. “I put a lot of my heart and soul into it. I don’t view it as a betrayal. I actually think the leaders of Goldman Sachs today don’t take the long-run interests of the institution at heart.”

Heffernan is right that whistle-blowers are often company loyalists who can protect their firms from significant losses, as we have written elsewhere. Still, retaliation against whistle-blowers appears to be on the rise. According to a 2011 survey, “Retaliation: When Whistleblowers Become Victims,” almost half of the respondents had observed wrongdoing, but only 65% of those who witnessed wrongdoing reported it. Of those who didn’t report wrongdoing, 46% cited fear of retaliation as their primary motivation for keeping quiet.

Smith’s future — like many other aspects of this scandal — remains disputed. Heffernan thinks Smith “will find it difficult to get his next job, because employers will imagine that he is inherently disloyal and publicity-seeking.” But, Bryant Urstadt, who reviewed the book for Bloomberg Businessweek, described Smith as “obviously smart” and someone who “understands some of the more complicated aspects of trading on Wall Street.” Thus, Urstadt writes, the former Goldman Sachs employee will eventually make his way to another Wall Street firm, “despite his exit style.”

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
Jennifer Curry

Jennifer Curry formerly served as managing editor of the Enterprising Investor. Previously, she was the social media manager at the New York Society of Security Analysts (NYSSA). Prior to her work at NYSSA, Curry worked as the senior project editor for a nonfiction imprint at Barnes & Noble Publishing and as an assistant editor at the H.W. Wilson Company. She is the editor of several volumes in the Reference Shelf series, and her writing has appeared in Smithsonian, IndustryWeek, Barnes & Noble Review, and other publications. Curry holds a BS in journalism and a BA in anthropology from the University of Kansas, and an MA in anthropology from Hunter College, City University of New York.

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