Some of the audience could not understand how a bank that had been involved in the financial crisis, subject to such negative media coverage, pilloried in the US Senate Committee for not being open and accused by a US Regulator of misleading clients, could win such a competition.
Let’s be clear about what happened. The survey system used in the awards had safeguards that ensured the results were genuine. Random employees were asked about their faith in their leaders, whether they were inspired by that person and whether they ran the organisation on sound moral principles. They were also asked to consider whether the senior management team listened rather than told them what to do, whether they truly lived the values of the company and whether the employee had confidence in the leadership skills of the senior management team. So to have won the award, the Goldmans employees must have been convinced of the moral nature of the organisation as well as the other criteria assessed.
But, given the comments from some at the awards, there is a difference of perspective between those inside Goldman and those outside. Similar differences between public perception and that of employees in other international banks involved in the financial crisis also exist, and often occur with organisations in the energy, mining, armaments and tobacco industries.
Goldman has a particularly strong culture and is often rated as one of the top performers in many areas of finance. It has very good leadership and its leadership development is some of the best in the world. It is very unusual for employees in investment banking to criticise their organisation externally as there is a very strong "team" spirit.
Legality is a quite defined measure, but judgments on the morality of an organisation are subject to so many factors it is unsurprising there are differences of view. Accurate judgement depends on the quality of the information you have about the action in question and the benchmark you measure against. Is the benchmark what other organisations do in the same industry or another standard applied that is a personal view which is constant irrespective of where the activity occurs, eg not telling the whole truth is always wrong?
The differences of opinion between employees and the wider public occur not in relation to activity that is obviously unethical or immoral – eg, deliberately putting employees at risk of injury to increase profit – but more in relation to activity that is on the margins, eg how much should organisations disclose to customers or staff about the negative effects of the organisation’s activities or products, eg the tobacco industry over the past 40 years. This is reputational rather than legal risk – things that aren’t illegal but which give the organisation a bad image. This problem is much more difficult to deal with and applies to the public as well as the private sectors.
So given the criteria and the results of the survey the award of the Most People Focused CEO award to Goldman Sachs was unsurprising and justified. But that does not mean that those who feel Goldman, and banks in general, on a global basis have not always acted with the highest standards are wrong. The fact that there was a financial crisis proves that the banks got it wrong. Much of the problem is that the banks see the issues as being commercial and economic and the public sees them as being moral.
The lessons are really two fold.
First, major organisations cannot assume that conforming to current industry standards or commercial motives means an action is ethical, especially in the eyes of the public.
Secondly the public should not always assume that the information they receive from the politicians and press is a fully accurate view of the whole picture within which an organisation decided upon its course of action. Politicians like sound bites – "high bonuses caused the problem" sounds simpler than "a combination of inaccurate risk pricing, inability to deconstruct complex products, rating agency conflicts of interest, ineffective US mortgage regulation and higher remuneration rates on high risk products caused the problem", but the latter is accurate.
The main issue with the banks is that the public doesn’t understand why a banker should get a annual bonus that is equal to the entire lifetime earnings of a nurse. Until the banks can explain why this is morally not just commercially right the public will doubtless remain indignant. The banks’ explanation would be interesting to hear.
Chris Roebuck, visiting professor of transformational leadership at Cass Business School