Re-Visiting Wall Street’s Trading Culture
Last fall, I wrote about corporate culture characteristics that allow certain companies to historically move through hard economic times and endure. They include having:
- an “optimistic spirit” to move through down times
- a “commitment to a long-term vision”
- an “ability to adapt” quickly to changing marketplace conditions
Consequently, ten (10) months later, are there any companies who are not only enduring, but thriving? And do they exemplify any of the culture characteristics noted above? The company that comes to mind is Goldman Sachs who in July announced its highest quarterly profits in its 140-year history. In October 2008, I used Goldman Sachs as an example of a company with a cultural ability to adapt quickly. This was due to its almost overnight decision in September 2008 to change its status to a bank holding company to survive the economic free-fall occurring on Wall Street.
But Goldman Sachs is not receiving universal accolades for its 2nd quarter performance, especially in relation to its new status as a regulated bank holding company. It is simultaneously being praised for successful risk-taking in its trading operations and being bashed as a “great American bubble machine” due to its abilities to commercially exploit market conditions at the expense of the little person. But, the issue that is rubbing folks the most is the perception that the company is taking excessive risk after being bailed out by the U. S. government and taxpayers. And according to company tradition, employees will potentially be well compensated for these results through hefty year-end bonuses.
There is a quandary here - in the last 20 to 30 years, we watched Wall Street lead the way to what some may call a “perfect performance-driven” industry. Wall Street firms figured out that they could put their own capital on the line to make big trading bets and investments in a wide array of businesses. Individuals at these firms who worked hard and found commercially exploitable opportunities were highly compensated. This all worked out fine, because the little and big folks who were investing with these firms made money too - until the economy tanked and safeguards put in place to protect against excessive leverage failed.
In the midst of all this hubris, everyone seemed to forget that another purpose of Wall Street is as a financial center to provide credit and a flow of money for all kinds of private, public and not-profit entities around the world. This is an important component of our capitalistic system that effects more than any one person’s year-end bonus.
Consequently, it seems like a good idea that the government regulator responsible for overseeing Goldman Sachs talk to the company’s leadership about how their world is more complicated now - performance and adaptability are not enough. There are also expectations that the culture at Goldman, as a bank holding company needs practices that show it values safety and soundness as well as growth and profits.
