Yesterday a London employee of Goldman Sachs penned a 1,200-word opinion piece in the New York Times alleging that top managers in the company ridicule and take advantage of their clients. Greg Smith wrote of the investment bank where he worked for 12 years that he no longer liked the "trajectory of its culture" and quit his job. The piece sparked a storm of criticism and debate on Wall Street. "People who care only about making money will not sustain this firm” or the trust of its clients "for very much longer," Smith concludes.
The Smith episode lies close to the heart of sustainability, a point echoed in his likely inadvertent word choice. That's because much of sustainability, or responsibility, or whatever companies choose to call it, essentially boils down to corporate governance.
Forces external to a company can reveal blind spots in management's assessment of risks and opportunities. Pressure on companies to divest from investments in South Africa in the 1980s is one example. Companies ill-prepared for a low-carbon economy might now feel punished by high oil prices and increasingly costly regulation.
What does the Smith controversy have to do with social justice and environmental preservation? Not much. But it has everything to do with blind spots and mitigating risk to a company's reputation. Smith's is an attack on Goldman Sachs's corporate governance, a category that includes, but isn't limited to, environmental and social issues. Corporate governance and transparency rightfully takes up more space in the Dow Jones Sustainability Index ranking questionnaire than either of the other topics, to pick just one measure. Goldman Sachs was admitted into the Index in July.
Jason Kennedy, CEO of the Kennedy Group, a London-based recruitment firm, told Bloomberg news that Smith may have aired a few comments that are true, but he's placed himself on a pedestal. The reason he's been at Goldman Sachs for 12 years is that he liked the name and probably liked the money. That is true, simply by virtue of Smith showing up for work. But the point here for managers - - and the driver of some companies into sustainability strategy -- is that Smith stopped liking the name so much that he waived the money and tattled in public.
"Sustainable" companies attract and retain employees by being good companies. That means being responsive to the needs of clients, shareholders, employees and the communities they interact with. Bright people are often willing to work for less money if an employer's values align with their own. Greg Smith is probably now one of them.
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