investment

The Amazing, Versatile and Unethical Goldman Sachs Code of Ethics

/ Jack Marshall / 6 Comments

Perhaps we all owe Goldman Sachs an apology. Everyone heaped outrage and ridicule the April spectacle of its executives going before the U.S. Senate and asserting under oath that they saw nothing at all unethical about intentionally selling “crappy” investment products to their trusting customers, then making money for their own firm by betting that the products would fail. Many were reminded of the tobacco executives, in the famous AP photo, all raising their hands to swear that they did not believe nicotine was addictive. After all, Goldman Sachs’s own website pledged openness, honesty, trustworthiness and integrity, saying,

“A critical part of running the marathon is acting consistently and playing a fair and honest game. ‘There’s only one thing we sell, and that’s trust.’ This applies to anything, but nowhere more than Investment Management. Clients trust us to do the right thing, and particularly when you’re in investment management and you’re appointed to manage clients’ money, they trust that you’re going to do it in a prudent manner. The worst thing you could do is breach that trust. We look for people who want to run the marathon, and who understand that trust fuels it.”

Now it seems that we were lacking a crucial document: the firm’s internal Code of Ethics, which Goldman Sachs recently made public. Under the provisions of this remarkable Code, what Goldman Sachs did to its clients wasn’t unethical at all; deceptive, conflicted, and unfair, yes…but not unethical, in the sense that it didn’t violate the Ethics Code itself. “Impossible!” you say? Ah, you underestimate the firm’s cleverness. Continue reading →

Ethics Dunce: Sally Herigstad

/ Jack Marshall / 9 Comments

Sally Herigstad, the MSN website tells us, is a certified public accountant and author of the book,  Help! I Can’t Pay My Bills. She is a personal-finance writer, it says, who has been contributing to Microsoft and MSN Money since 1998.

And, based on her article, “6 Reasons Not to Save for Kids’ College,” she is also a fully-qualified Ethics Dunce.

It is fine to explain the various inefficiencies of putting aside funds for your children’s education, but Herigstad’s argument boils down to selfishness, and thus serves as an incentive for parents to abdicate the ethical duties of parenthood because an expert has decreed that it’s the reasonable thing to do. Continue reading →

If Only There Had Been More Like Her…

/ Jack Marshall / 2 Comments

Frank Navran, a friend, colleague and perceptive ethicist with a talent for teaching ethics with vivid stories, tells this one, a true case of integrity applied the right way, by the critical person, in a timely fashion:

While attending an ethics conference in New York in October of 2008, I decided to stay with friends in New Jersey. That meant riding the train into the City for my conference. On the second day of the conference, I happened to sit next to a young woman who was neither reading nor napping so I engage her in conversation. It started with a simple “Do you ride the train every day?”

She said that yes. she does ride the train every day, and had been doing so for seven years since she and her family chose to move to New Jersey “for the kids”. I asked what kind of work she did, and she replied that she  was the CFO of a mid-sized insurance company.  Now, recalling that this was the fall of 2008, insurance companies were in the news. And so I asked her how things were at her company. Her reply was, “Better than most”.

Now I was curious. “What does “Better than most” mean?”, I asked.

She went on to explain. “About three years ago I left AIG, where I knew my prospects for advancement were limited, and accepted an offer to become the CFO for my current company.  As a newly-hired CFO, one of the first things I did was to meet with my staff. When meeting with the gentleman who managed our investment portfolio I asked for a description of our holdings. He proceeded to sing the praises of our investment strategy which included a significant percentage dedicated to what he referred to as “securitized debt”.

She said she was not familiar with these instruments and asked how they worked. His reply was that they were AAA rated and were returning huge investments. Unsatisfied, she probed for details, and when he was unable to provide them, suggested that the “do his homework” and meet with her again in two days.

Two days later, when asked to explain securitized debt, he restated that they were AAA rated and very profitable but added that no one seemed to really understand just how they worked.

Her reply, she told me, was simple She gave him three months to divest the company of anything that he couldn’t adequately explain to her simply because she was not going to go before her Board and justify their investment strategy without understanding the nature of and workings of the instruments in which they were invested.

“In other words, she had integrity,” Frank concludes. “What a radical concept.”

Indeed. What the CFO did was not, of course, radical. It was honest, responsible and prudent. We can only imagine how different things would be today if there had been more executives like her when the financial sector was operating with mirrors,  winks, and sleight of hand.

<Sigh!>