Goldman Sachs has come under fire for placing its interests above those of clients, lack of transparency and insensitivity regarding its compensation practices. Goldman has been the target of numerous investigations, enforcement actions and private litigation. Key governance flaws include executive compensation and business practices that create financial and reputational risks.
The March 2012 New York Times op-ed piece, Why I am Leaving Goldman Sachs, by Greg Smith, head of Goldman’s U.S. equity derivatives business in Europe, the Middle East and Africa, didn’t help their already tarnished reputation. Less than two weeks before Smith’s op-ed ran, Leo Strine, Jr. issued an opinion lambasted Goldman for conflicts of interest as an advisor to El Paso Corporation in its sale to a company, Kinder Morgan, in which Goldman had a substantial investment.
the court is not swayed by Goldman’s assertions that it was not influenced by its own economic incentives to maximize its $4 billion investment in Kinder Morgan by steering El Paso towards a deal with Kinder Morgan at a suboptimal price.
Similarly, a Senate report on the causes of the financial crisis singled out Deutsche Bank and Goldman Sachs for criticism, noting that Goldman profited from arranging CDO securities and selling them to investors while betting against those same securities in its proprietary trading operation. That conflict of interest, the Senate report concluded,
led Goldman to conceal its adverse financial interests from potential investors, sell investors poor quality investments, and place its financial interests before those of its clients.
Although Goldman has declassified its board and adopted a majority vote standard for uncontested director elections, it still has a long way to go and appears to be an excellent candidate for proxy access.
The Goldman Sachs board of directors is supposed to keep management in check, but Reuters’ blogger Felix Salmon says it is stacked with company insiders, conflicting interests and inexperience. (October 15, 2012) Why Goldman’s board falls short – Felix TV
Two Goldman Sachs “clients” take a look at themselves after Greg Smith’s New York Times op-ed in this musical puppet number. A parody of the Oscar-winning song “Man or Muppet” rewritten by author and law professor Frank Partnoy. (March 26, 2012)