Two very smart writers provide telling insight into Goldman's bonus set-aside that looks to be the largest in its history, something in the neighborhood of $23 billion in bonuses for jobs in 2009. Although I'm attempting to keep this post neutral, I'm not certain that's possible. I have no interest in making a judgment on the issue largely because I'm not fully certain how to look at the issues and facts if they were available, which they're not, nor even that I would understand all the financial complexities, anyway.
But it's especially intriguing to read Frank Rich's column in the Sunday Times and then Roger Martin's blog on Harvard Blogs. You may want to have them at hand as you think through their views.
First, it's a fact of history that Goldman, along with the other major financial houses, survived as a result of a taxpayer bailout.
Rich puts the Goldman largesse in the context of the taxpayer's bailout, and compares their gift to charity to the nickels and dimes Rockefeller gave away in his own attempts at PR. Rich quotes Matt Taibbi of Rolling Stone who writes of Goldman as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Rich is skeptical that Goldman can be controlled by congress's attempts to reform finance. And even more skeptical of ever finding out who is to blame for the financial fiasco of the last 18 months. The article is essentially a critique of a financial system that makes possible and permits this. His conclusion is that if Teddy Roosevelt palled around with John D. Rockefeller as the current administration pals around with Wall Street titans and lobbyists, it would have been a lot worse.
Rich's philosophical underpinnings are oriented to the community at large, and to the responsibility of business and government to that community.
Now, Roger Martin, Dean of the Rotman School of Business at the University of Toronto, and former director of Monitor, the global strategy consulting firm. Martin makes no attempt to either defend or oppress Goldman, but simply describes the nature of business and Goldman's model, suggesting that anyone who doesn't understand the model has their head in the sand.
Here's Martin's final summation: So this is not new at all. The order of priority is: Goldman bankers first, the external shareholders second, and everybody else last. This is not a secret and has never been. The Goldman bankers are not trying to be sneaky. In the current situation, if sounding sorrowful or giving a bit more money to charities helps preserve Goldman's primary imperative of maximizing banker earnings in the future, we will see a dollop of each. But there should be no confusion as to the purpose of any such gesture.
As I suggested, Martin doles out the facts of the setting, clarifies them, states the obvious: that's the nature of business. So, why are you surprised when Goldman walks away with the treasury?
I argue that these two models have both pluses and minuses, and that the nation has lived successfully with these two models since its inception. The populace and government and business push and pull with each other based on the context, often working together, and just as often working against each other.
I think the issues are a lot more complex than most want to admit--of course, I'm leaving a lot unsaid. But it's a lot of damned if you do and damned if you don't. And as a Reuters reporter put it, ""Main Street still owns much of the risk, while Wall Street gets all of the profit." I do, however, think it's helpful for all of us to admit to the realities of both perspectives. I'm unaware of any means that the two perspectives can be richly coordinated. I do know that historically, and currently, we use government policy to try to manage those contradictions.
Well. . . some ramblings from a guy who has been a consultant to management for nearly 30 years, but who in his earlier life was a member of a Detroit manufacturing union and a minister of the church. I also resist conclusions driven largely by the state of my glands. How do you like that for contradictions?