Why Goldman Sachs Fund Managers Scooped Up Venezuelan Bonds Without Checking First

Goldman Sachs fund managers did not hesitate when a brokerage firm offered to sell them Venezuelan bonds for pennies on the dollar. Why not hop in and help fund a government that has left its people without food, toilet paper, and life’s basics? It never occurred to them that a decision to buy $2.8 Venezuelan bonds might result in some blowback and should have probably gone through the firm’s standards committee. That committee was created post-2008 so that senior management could take a look at investments that were shaky financially or socially. Goldman CEO, Lloyd Blankfein, trains employees on the importance of Goldman’s public perception, “Everyone has to have big eyes, big ears, know what’s going on around them, and be policeman for the organization.. At the end of the day, we only have one reputation.”

All good platitudes, especially the addition of the worn phrase, “at the end of the day.” Repeat them all you can and all you want, but the phrases cannot compete with what you reward and pay structure. A money manager cannot be swayed by such when he is offered bonds for pennies on the dollar. It’s what money managers do under current incentive and performance standards. Employees sit through the Blankfein lectures on reputation being the end-all and the cynical money managers do what they do best — buy low, cash in high. The training only makes them more cynical, which is why it did not dawn on them to seek approval. They buy cheap; it’s what they do. Goldman has a long way to go before its culture gives money managers the freedom to question reputational soundness of a bond investment in some bad actors. Set up standards committees, let your CEO do the training. ‘Tis all for naught if the culture is driven by results.

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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