Goldman unveils checks on conflicts in bid to fix image
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's (GS.N: Quote) Lloyd Blankfein claimed success in putting the bank and his legacy as CEO 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 checks, including through elaborate computerized systems, to ensure that the bank is fair to clients and avoids conflicts, such as being on different sides of the same trade.
Goldman's changes do not appear to go beyond the kind of committee reviews that other Wall Street firms now do, executives at two rival banks said. But they added the use of computerized analyses to detect unfair deals could make the system more effective than rivals' at catching potential pitfalls, even if it costs them some business.
"They want to get their reputation back," said Roy Smith, a professor at New York University's Stern School of Business. "They know that means giving up some business."
Goldman faced public outrage in the aftermath of the 2008 financial crisis over accusations, including a U.S. Securities and Exchange Commission lawsuit, that it had treated clients improperly. Blankfein and other executives also faced intense grilling on Capitol Hill, which deeply embarrassed its CEO.
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, people familiar with the situation 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 said. Continued...