Goldman unveils checks on conflicts in bid to fix image

Thu May 23, 2013 2:26pm EDT
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By Lauren Tara LaCapra

SALT LAKE City (Reuters) - After dozens of meetings with executives and regulators, 100,000 hours of employee training and an immeasurable amount of public grief, Goldman Sachs Group Inc (GS.N: Quote) CEO Lloyd Blankfein claimed success in putting his bank and his legacy back on track.

At Goldman's annual meeting on Thursday, Blankfein unveiled details of a three-year review and overhaul of the bank's practices in dealing with clients, following high-profile missteps that tarnished its reputation in the aftermath of the financial crisis. The overhaul imposes a system of checks to ensure that the bank is fair to clients and avoids conflicts, such as being on different sides of the same trade.

Goldman faced public outrage in the aftermath of the 2008 financial crisis over accusations that it had treated clients improperly. The U.S. Securities and Exchange Commission sued the bank in April 2010, accusing it of misleading clients in a mortgage derivative deal. While the bank settled for $550 million without admitting anything more than having made a "mistake," Blankfein and other executives faced intense grilling on Capitol Hill.

People familiar with the matter say the lawsuit and the hearings deeply embarrassed Goldman and Blankfein. After serving as CEO since June 2006 and steering the bank through the financial crisis, the 58-year-old Blankfein does not want to leave his post until he feels the bank's reputation and his own legacy are fully restored, these sources said.

The month after the SEC's charges, Blankfein set up the Business Standards Committee. He traveled around the world to hold town-hall-style discussions with Goldman partners and managing directors.

In a video on Goldman's website on Thursday, Blankfein tells a group of employees not to be afraid to call him if a problem appears because the risk of reputational damage outweighs the cost of possibly wasting his time.

"Everyone has to have big eyes, big ears, know what's going on around them, and be policemen for the organization," he says in the video.

Blankfein said on Thursday that the committee was part of a "much larger ongoing commitment to be open to change and to learn the right lessons from recent experiences."   Continued...

Lloyd Blankfein, Chairman and CEO, Goldman Sachs Group, speaks with the media after meeting with U.S. President Barack Obama and other CEOs at the White House in Washington February 5, 2013. REUTERS/Joshua Roberts