The Goldman Culture Curse: Corzine, MF Global, and Investigations

Jon Corzine began as a bond trader at Goldman Sachs in 1975. Through a climb that made him head of bond trading and then CFO, Mr. Corzine eventually became chairman of Goldman in 1994. After leaving Goldman in 1999, he became a U.S. senator, representing New Jersey, then governor of New Jersey, and then, in 2010, he was brought to MF Global. He had returned to Wall Street as a heavy hitter.

Problem is that MF has declared bankruptcy, the FBI is taking a closer look at what exactly happened at this failed firm, and investors realize they have lost their shirts by doing business with another Goldman alum. Mr. Corzine is already lawyered up, a good idea given that he spent the last five days at the company trying to find $659 million in customer accounts. Oh, and he also spent the past year lobbying regulators in DC to not impose restrictions on how firms such as his could move cash around. Might the Barometer suggest that those regulations could be just the ticket for avoiding losing customer funds?

The problem with all things Goldman is the culture in which people and processes at steeped. “Filthy rich by forty” is the Goldman motto. Such a credo does not leave much room for personal values or ethical discretion. Goldman breeds glitz that breeds temporary success with a wide swath of destruction left in the wake of that short-lived success. Corzine was ousted because of problems with his partners at Goldman. A corruption scandal dogged him during hi gubernatorial re-election campaign. He lost to Chris Christie. And now he leaves behind a failed firm and investors with portfolios full of bonds from three of the four European PIGS (Italy, Spain, and Portugal – somehow Corzine managed to avoid investing in Greek bonds – perhaps the riots in the street last year tipped him off that a melt-down was coming). Then again, Mr. Corzine was never one to subscribe to the importance of moral hazard in free markets. He believed, “Europe wouldn’t let these countries go down.” Europe may not have a choice. Mr. Corzine bet arrogantly on PIGS’ bonds, and he was wrong. Ironically, in a tip of the hat to moral hazard, no one bailed out MF Global.

The scariest part of the sordid tale of MF is that people continue to follow blindly after the Goldman standard. Be afraid of iconic leaders who seem to defy odds when it comes to financial performance. Character and past actions, in all their misguided glory, matter. Perhaps this MF failure will encourage investors to take a closer look at both before laying their cash on the table.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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