The New 5G: Goldman, Greed, Graft, Gupta & Grift

Goldman

Goldman Sachs admitted wrongdoing in a bribery scandal and will pay over $5 billion. When senior executives break bad, the key question isn’t “Why?” but “When?”

To see how your own company compares, take the the “Bagel Test”!

Greed & Graft

Goldman Sachs recently signed a deferred prosecution agreement with the federal government. The bank admitted that two senior bankers helped embezzle billions of dollars from a Malaysian sovereign wealth fund by bribing officials.

On top of a $2.5 billion fine to the Malaysian government, Goldman will pay $2.8 billion in U.S. fines and disgorgement of fees, but avoid imposition of a federal monitor, as well as limitations on its activities.

Two senior Goldman bankers have been criminally charged. One has flipped and become a cooperating witness. The other has been extradited from Malaysia and awaits trial.

Goldman paints itself as a victim of two unscrupulous employees, while the Government argues that, enticed by unusually fat fees, the bank ignored warning signs of graft.

Gupta

Goldman has figured in a number of scandals since the 2008 mortgage meltdown. One notable case involved Rajat Gupta, a member of Goldman’s Board of Directors and former Managing Director of McKinsey & Company.

Gupta was convicted of insider trading and sentenced to two years in prison. Immediately after two Board meetings, he telephoned a hedge-fund owner with inside information on Goldman’s financials that netted the owner $17 million. (For more on Gupta, see my book.)

Grift

When senior executives lie, cheat, and steal, the natural question to ask is “Why?” The Goldman bankers in the embezzlement scam were already rich by any measure. So was Rajat Gupta when he betrayed Goldman’s trust and broke the law. Why take such stupid and unnecessary risks when you are already on top? As the lead character in the movie, Wall Street, asks villain Gordon Gekko, “How many yachts can you water-ski behind? How much is enough?”

The better question to ask, though, may not be “Why?” but “When?” By this I mean, “When did the lying, cheating, and stealing start?” Did these senior executives break bad only after they made it to the top, or was breaking bad how they got there?

The “Bagel Test” of Organizational Culture

Asking “Why?” focuses on the individual. Asking “When?” focuses on the organization.

Consider the bagel test. In a celebrated real-world case, a vendor stocked various office kitchens in the District of Columbia with bagels. Payment relied on the honor system. Patrons were asked to insert payment through a slit in the lid of a No. 10 tin can.

In one situation involving a multi-story office, the vendor found that the executive level had the greatest amount of grifting. He could not decide, however, whether this occurred because the senior executives’ status made them feel entitled to free food, or because the organization’s promotion process selected for grifters.

One has to wonder similarly whether Goldman Sachs’ culture produces and/or selects for liars, cheaters, and thieves.

Before casting the first stone, however, pool $100 with your colleagues and apply the bagel test to your own office. In the comments section below, you can post the results, anonymously or otherwise.

#therightwaytowin

1 Comment

  1. […] previous post described Goldman Sachs getting hit with over $5 billion in fines and disgorgement sanctions. These […]

Leave a Comment