I’m Starting to Worry about Goldman Sachs

The outlines of Goldman’s new public relations strategy are becoming clearer.  It involves more television appearances by CEO Lloyd Blankfein, investments in trendy green-tech companies and a new twitter account, unveiled at yesterday’s annual shareholder meeting.

It is part of an effort to create a “more open and friendly” firm, according to news reports.

Lloyd Blankfein in a Zuckerberg-style hoodie surely is next on the agenda.

This looks a little like the time your uncle tried to look cool by wearing skinny jeans.  He was still the same fat guy, just a lot more uncomfortable.  And that’s the risk for Goldman or any other company that tries on a new style without really changing.  The new image will be superficial and short-lived.

Unless Goldman addresses tough issues like executive compensation, business conflicts and financial disclosure, perceptions about the firm won’t really change.  Achieving a lasting shift in public perception takes a lot of work, and it starts with making real changes in the institution itself.  If it were as simple as television interviews and tweets, no firm on Wall Street would have an image problem.

There’s another risk at play here, too.  I suspect that clients don’t really want Goldman to change too much.  For clients, anything that distracts the firm’s management from its core focus is bad.  Making markets, clinching merger deals and raising capital are things Goldman does very, very well, and clients keep returning for more. Goldman’s franchise remains strong, despite the endless negative media coverage the firm has suffered these past few years.  So perhaps Goldman shouldn’t stray too far from the image that has made it so successful.



Was the New York Times at Fault for its Handling of Greg Smith’s Letter?

Now that we are in day two of the Memo that Shook Wall Street –  the most famous resignation since Jerry Maguire’s “mission statement” – it’s worth asking whether the New York Times has anything to answer for in this episode.

Landing a prominent article on the Times op-ed page doesn’t happen overnight.  Unlike the news pages, which are designed to cover breaking news quickly, an op-ed takes several days if not weeks to produce.  There’s internal bickering among the Times’s editorial-page editors over which issues and writers will appear on its coveted pages.  Then there’s usually a bit of trimming and primping – usually without the writer’s involvement – as the submitted piece gets ready for its debut.  And especially for unknown writers like Greg Smith, there’s (presumably) some checking of backgrounds and facts.

That is where things get interesting in the case of Smith’s article.

There must have been extensive coordination between Smith and the Times op-ed editors to time the piece with the day he would resign.  The Times clearly wanted the article to have an impact, and wouldn’t have had the same punch if Smith were a former Goldman employee when it appeared.

Nor does it appear the Times made an effort to confirm certain facts with Goldman or offer it a chance to rebut Smith’s assertions.  Neither is a requirement when it comes to op-eds or other “comment” pieces; such niceties are usually reserved for “news” pieces.   But if it had checked, the Times might have better understood that an “executive director” title meant Smith was not as senior or as influential as he might have been suggesting.

It’s hard to avoid the conclusion that the Times’s editors engaged in a calculated effort to damage Goldman.  That is troubling.

Welcome to Goldman Sachs, Mr. Siewert – Update

In an earlier post, I suggested that Goldman send a note to its employees to respond to Greg Smith’s public resignation letter.  It appears my advice was taken. Goldman chiefs Lloyd Blankfein and Gary Cohn did indeed send a memo (perhaps I’ll send them a large bill).  It was very well done.  Here’s why:

  1. It used data, not opinion.  Goldman was able to cite its employee survey data to demonstrate widespread support for the firm and its business practices.  That’s much stronger than simply saying they disagree with Greg Smith’s assertions.
  2. It showed Goldman has a process.   Goldman has a mechanism that enables employees to raise concerns, and to do so anonymously if they wish.   (The requirements of the whistleblower-protection statute likely account for that, and similar processes can be found at many big firms.)  Goldman also pointed out that Smith didn’t avail himself of that process, which makes him look selfish and undercuts his credibility.
  3. It admitted fault. Blankfein and Cohn acknowledged that the firm doesn’t always get it right and tries to set things straight when it finds a problem. That was a good way to respond to Smith’s claims without being specific. Here, admitting fault isn’t a sign of weakness but of strength.

Goldman has a lot of work to do to restore its reputation, but this memo is a good, timely response on a critical day.

Welcome to Goldman Sachs, Mr. Siewert

The public resignation letter by Greg Smith, a Goldman executive, is lighting up the blogosphere.  It’s certainly not the way Jake Siewert imagined spending his first day on the job as head of communications.

As a candid, personal confession from a Goldman insider, the letter is very damaging.  It counters the notion that Goldman has been a united force, its people standing arm-in-arm to defend the firm against unfair criticism.  Now we know that some inside the firm agree with the critics – and are willing to go public.

But it’s also likely to bring supporters of the firm forward.  Look for their letters in the days to come.

There’s always more to a story like this than meets the eye.  For one thing, Mr. Smith wasn’t a managing director, considered the elite of the firm.  After a dozen years at Goldman he certainly would have been considered for a promotion to managing director.  Did his squeamishness about Goldman’s money-making keep him off the list, or was it something else?

So what should Jake Goldman do now?  A short note to its staff from Lloyd Blankfein reiterating the firm’s principles is the right course.   There’s noting to be gained by taking on Mr. Smith in public or starting a campaign to rally supporters.

What the Goldman board should do, however, is another question entirely.  It wouldn’t be surprising if it now looks more closely at the timing for naming Goldman’s next chief executive.


Goldman’s next PR Chief

Somewhere inside Goldman Sachs a managing director in human resources is anxiously leafing through a stack of resumes looking for a candidate to replace PR chief Lucas van Praag, who retires at the end of March.  There’s been little news since Lucas’s departure leaked a month ago and a former Treasury staffer was tipped as his likely replacement, suggesting the firm hasn’t yet inked a deal.

So before Goldman writes a big check for his signing bonus and measures his office for new carpet and curtains at 200 West Street, there is time to reflect on just what sort of PR supremo is needed at a top financial firm today.

Because Lucas’s exit marks not only the end of a chapter for Goldman, but the twilight of a style of communication that has dominated financial firms for two decades.

Lucas epitomizes the current style – a strong PR chief who manages access to the firm’s executives, nurses close relationships with editors at big-name news organs and metes out swift retribution to reporters who stray from the preferred line.  Every bank follows this model, though few have been as proficient at it as van Praag.  (See my earlier post for more on why Lucas is a rock star.  Folks who aren’t Lucas fans should have an air-sickness bag at the ready.)

This model works pretty well when a handful of publications – and a cadre of writers and editors within them – dominate news production and distribution.  By managing the media’s access to the firm’s principal assets – its information and senior executives – it is possible to manage the message and win favorable terms over how and when stories appear.

Of course this approach doesn’t always produce the desired results, and a firm still gets slammed when scandal strikes.  It also breaks down when executives leak information or speak to the media without authorization, so enforcing the internal rules is essential.  (Some years ago a Goldman executive found himself quoted in a weekend news feature that lingered on his lifestyle.  Every trace of his existence at Goldman was gone by Monday morning.)

Despite its imperfections, this approach brought some order to an inherently disorderly process.   Above all, it was an effort to manage the channels by which clients, regulators, recruits and others got their information and formed their views about the firm.

But that world has been blown apart.  The march of technology has opened a multitude of channels and weakened the establishment media that Wall Street firms long relied on to carry their message.

So what does this new age require in a PR boss?

I’d suggest the new model is akin to an executive producer.  It’s someone who will oversee a sizable operation that generates content and sends it directly to its audience instead of feeding it into the traditional news machine.   In this way, firms will increasingly resemble media companies, producing content for a variety of channels.  Goldman TV, anyone?  (It’s not far-fetched.  Vanguard and other fund managers have a growing self-produced broadcast presence.)

Of course, the top PR dog at Goldman will still need to be an exceptional strategist, knowledgeable about the firm’s businesses, cool under pressure and able to inspire trust – just like today.  It’s the execution that will change – radically – as the firm starts to generate more of its own content and delivers it directly to its audiences rather than have it channeled through the press.

That’s a far cry from the traditional role of a PR chief at a Wall Street firm.  But just as the boozy press lunch of yesteryear gave way to a more professional (and sober) approach, the era of the executive producer is about to begin.


Defending Goldman Sachs: The 5 reasons its PR has triumphed under Lucas van Praag

Lucas van Praag, the longtime communications chief at Goldman Sachs, is stepping down.  To those of us in the PR trade, this news yesterday was much more significant than Facebook’s IPO filing and the legion of twentysomething millionaires it will spawn.

Van Praag has done a brilliant job of defending Goldman and handling the outsized egos that walk its halls.  Goldman is smart, arrogant, highly successful and envied – qualities that make it a PR challenge, every day.  No one has handled it better.

(Disclosure: I’ve known Lucas for a long time, and sought his help when he was a partner at a UK public relations firm and I led PR for JPMorgan.)

Van Praag’s departure is a clear sign that the image crisis is largely over for Goldman.  Ironically, even though its financial results have been weak lately, its reputation has improved.

Here are five reasons Goldman’s PR has triumphed under van Praag:

1.  It took on the media.  Van Praag was an unashamed advocate for Goldman and he was very effective.  At a time when most spokespersons recite canned statements and ineffective variations of “no comment,” van Praag unleashed sharply worded retorts.  They not only made for lively reading but, more usefully, helped readers recognize that there was more to the story.

A lot of the reporting on the financial crisis was shoddy – badly informed, sloppily written, poorly sourced.  The New York Times still gets basic facts about financial markets wrong, and it’s not alone.  Few aside from van Praag were willing to call them on it.

He also waded into the blogosphere to take on critics – turf most wholesale firms keep away from.  One of van Praag’s more memorable jousts with the media occurred in the Huffington Post, where he used the immediacy of the site to refute a New York Times article, point by point, shortly after it appeared, rather than endure the tedious process of publishing a letter to the editor.  (Notably, ISDA recently began an excellent blog to respond to misreporting on markets and financial instruments, particularly derivatives.)

His muscular defense of Goldman brought van Praag a bit of attention from the media.  It seemed to reach a peak early in 2010, and was summarized neatly by the New York Times (in an unsigned Dealbook item, suggesting the author did not want to endure a call from Van Praag):

“Mr. Van Praag, Goldman’s British-born public relations chief, has taken quite a drubbing in the media of late, being accused of handling the criticism of the investment bank in “ham-fisted” manner and following a “P.R. policy that’s basically a stiffly extended middle finger, waved in the air for all to see.”

Of course, it was far better for Goldman that Van Praag was the focus of the media’s ire instead of the firm.  (Hat tip to Epicurean Dealmaker for his excellent post from February 2010 on this subject.)

2.  It acknowledged mistakes.  In 2009 Goldman CEO Lloyd Blankfein made the unusual step of publicly acknowledging that the firm “participated in things that were clearly wrong and we have reasons to regret and apologize for.”  His admission didn’t go as far as some might like, but no other big-bank CEO has been so candid.  And while critics of the firm quickly dismissed Blankfein’s statement, it surely had a big impact on clients and helped the firm begin to rebuild relationships strained by the crisis.   Settling with the SEC for $550 million was a vivid acknowledgement, too.

3.  It’s doing things differently.  Contrary to popular belief, effective PR is about actions, not words, and Goldman has been willing to act.  It created a business standards committee in 2010, which made 39 recommendations for improving business practices.  Strong institutions learn from trauma.  It’s telling that no other big bank has voluntarily reviewed and revised its standards of conduct.

Goldman also deserves high marks for its efforts to foster economic growth, here in the U.S. and overseas.  It has committed $500 million to support small businesses in the US and the UK, and its 10,000 Women initiative, begun in 2008, is providing access to business education for underserved women in 22 countries.

Sure, $500 million is a fraction of the annual bonus pool, but it’s a sizable sum.  And beyond money, the firm is opening its considerable brainpower to these enterprises, a resource for which big companies gladly pay millions.

4.  It engaged the issues.  It’s often difficult to have a rational discussion in the glare of the media spotlight.  So Goldman has offered its views on a variety of issues – from financial regulation to environmental sustainability, mainly on an extensive section of its website.  And its “Progress is Everyone’s Business” advertising campaign was focused and compelling, putting the issues in the forefront, rather than the firm, which isn’t an easy thing to accomplish for egocentric bankers.  It’s easy to scoff at it these tactics as self-serving, but it’s a serious effort to present important issues, supported by facts.  No shouting, no frenzy.

5.  Because, after all the battering – the acres of bad press, the high wattage Congressional hearings, the protests – Goldman Sachs is still at the top of the heap.  It remains the smartest firm; the most envied, the most copied and the most sought-after among freshly minted MBAs.  For proof, see Fortune’s “Most Admired” list, where it remains the top-ranked financial firm.

Goldman’s not perfect, and some changes, like its compensation practices, are still slow in coming.  But it has shown an ability to listen and adapt, which is crucial for winning the image battle – and creating an enduring, successful business.