Saturday, May 1, 2010

Goldman Sachs, the Shitty Deal, and Social Media Public Relations

Goldman Sachs is the most respected name on Wall Street. The firm has no peers. If you ask any college or graduate business school finance major where they want to work a large majority would respond without question, Goldman Sachs.

In an article from the New York Times a couple years ago, the firm was nicknamed "Government Sachs" because so many of its employees end up working for the U.S. government. Some prominent Goldman alumni include: former Treasury Secretaries Henry Fowler, Robert Rubin, Hank Paulson, and current World Bank President Robert Zoellick, and former U.S. Senator Jon Corzine.

In general, Goldman Sachs senior executives shy away from publicity while working for the firm. This strategy has helped create a mystic about the company. Social media has forever changed the public relations game. Goldman Sachs' reputation was tarnished this past week in a manner that would not have been possible before the age of social media.

It is very rare for members of Congress to use foul language in any context during televised proceedings. However, Senator Carl Levin chastised Goldman Sachs because an employee of the firm had stated in an internal email that a collateralized debt obligation called Timberwolf I that Goldman was selling was a "shitty deal." Senator Levin persistently asked about and berated Goldman Sachs about the "shitty deal" numerous times throughout the hearings.

Goldman Sachs EVP and Chief Financial Officer David Vinair's testimony will forever live on in social media due to the interesting exchange that occurred between himself and Senator Levin. When Senator Levin grilled Vinair about the "shitty deal" internal Goldman Sachs email Vinair stated, "I think that is very unfortunate to have [that comment] on email." It sounded as though the entire audience was stunned by that statement and then a delayed laughter was heard in the background. Vinair later corrected himself but the damage had already been done.

As Gretchen Morgenson of the New York Times has pointed out and last week's hearings clearly demonstrated there are so many conflicts of interest on Wall Street. These conflicts have been around for years. Lawyers are not allowed to have these types of conflicts so why are the "Masters of the Universe" allowed to have these types of conflicts?

These hearings come on the heels of last week's SEC fraud complaint against Goldman Sachs and one of its employees. In addition, President Obama and Congress are also currently battling over a financial regulatory overhaul. The Goldman Sachs testimony that I watched reminded me of the movie Wall Street and Gordon Gekko's "Greed is Good" speech because some of the Goldman Sachs employees who testified sounded as though they were about to utter Gekko's line that "greed for a lack of a better word is good. Greed is right. Greed works."

Goldman Sachs has weathered numerous scandals and controversies during its 140+ years in existence. Each time the firm has rebounded and come back stronger than ever. The company may be one of only a few brands that may be immune to the social media age. Even though the brand may not suffer in the long run, there will be employees who are scapegoated to protect the firm's image. Therefore, in the social media age, lawyers need to be well versed in not only the legal matters before them but how their clients may be perceived on social media. To learn more about this issues you may contact me at

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