Goldman Sachs Partner, Josephine Linden, had breakfast with 15 students on Tuesday, April 11th as part of the Paul M. Montrone Seminar Series on Ethics. Ms. Linden is Regional Manager of the New York Private Wealth Management division of Goldman Sachs and is Goldman Sachs’ former Head of Global Equities Compliance.
Ms. Linden began her discussion by asking students “what’s the first thing that comes to mind when you hear these names: Martha Stewart, Dennis Kozlowski, Michael Milken, Richard Nixon and Pete Rose?” She explained that even the perception of wrongdoing can be extremely damaging for individuals such as Tom Delay, Jeffrey Skilling or Ken Lay, whose reported wrongdoings have significantly overshadowed their achievements. Early in her discussion, Ms. Linden highlighted the 2nd Goldman Sachs Business Principle which states “Our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore.” She enhanced this idea with quotations from Benjamin Franklin and Warren Buffet. According to Ben Franklin “glass, china and reputation are easily cracked and never mended well” and Warren Buffet likes to say, “it takes 20 years to build a reputation and 5 minutes to destroy it.”
Similarly to David Gebler of Working Values Ltd., Ms. Linden spoke about ethics in the context of “what makes good people do bad things?” She mentioned the slippery slope which gradually drags people into unethical situations. What begins as a relatively minor offense, such as backfilling a trade ticket can, over time, cascade into much more serious crimes such as insider trading. It is difficult to stop oneself along the way and people tend to rationalize their current action as being only a little bit worse than their prior actions. Ms. Linden admitted that unethical situations are not unheard of, especially in client service oriented communities. Peter Bacanovic, Martha Stewart’s broker, was merely trying to provide the best client service he could for a large client. As Bacanovic learned the hard way, it is not always obvious what the “right thing to do” is. Most situations have significant grey area, and are not just black or white.
Ms. Linden placed great emphasis on the importance of the corporate culture in creating and maintaining strong ethical practices. She asked students how they would feel if they found themselves working in a firm where a new Analyst was teased by a Vice President for “playing by the books” or where a new Associate was told to cut corners by a Managing Director in order to meet a deadline. Ms. Linden believes that culture is paramount to the ethical foundation of a firm. Culture and solid ethics absolutely must flow from the top down, with senior leadership setting the example.
Once finished with her prepared comments, Ms. Linden turned to the students and began probing for insights and information. She asked each student what they plan to do professionally over the summer or after graduation, and managed to engage each individual in conversation. Perhaps the most interesting portion of the breakfast was when Ms. Linden provided brief scenarios and asked students to articulate how they would handle each situation. She asked what we would do if we found out that one of our clients was arrested and imprisoned for Driving While Intoxicated and leaving the scene of a car accident in which he had killed a pedestrian. Should we maintain this person as our client? She asked what we would do if Martha Stewart were our client. Would we keep her? What about Jeffrey Skilling? Most everyone at the table became involved in the lively conversation and many different views were expressed. Students continued to discuss these issues among themselves after the breakfast.
Another issue which was raised by students was whether ethics sessions could be integrated in the on-campus recruiting process. A critical point of differentiation among financial services firms is corporate culture, and a great forum for business school “learning” could come from the leaders of highly regarded firms such as Goldman Sachs. While many around the table agreed that recruiting presentations must openly and honestly present the values of the organization, some students felt that attracting students to recruiting presentations, but then using the session to discuss ethics, might be seen as deceptive if the purpose of the session was not made clear.
Overall, Ms. Linden’s breakfast was a huge success and I received a great deal of positive feedback from students. To conclude, Ms. Linden again used a pithy quotation to make her poignant and critical point. She quoted Abraham Lincoln saying, “When I do good, I feel good; when I do bad, I feel bad.” She added, “when you don’t want something written about on the cover the Wall Street Journal, and don’t want your loved ones to read about it there, don’t do it!”
