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Our Take: Wall Street Might Subtly Bend Toward Main Street's Values

In the past month or so, the highly public tug-of-war over the future shape and direction of the financial industry has refocused from compensation to culture. The trend bears watching because it could subtly alter certain criteria by which financial institutions decide who to hire and promote.

A signal event is Harvard Business School's choice of Nitin Nohria as its new dean, effective July 1. A long-time advocate for emphasizing ethics in business education, Nohria was a prime mover behind the MBA Oath movement. Launched by HBS students last year, the MBA Oath now claims participants in 250 schools around the world.

"I've always maintained that business can be a wonderfully noble position," Nohria told The Wall Street Journal. Noting that "Society's trust in business has taken a hit," he contends "management education has been overly-focused on the principles of management" - presumably at the expense of short-circuiting any awareness of business's broader role in society. Other leading management educators remarked that having someone like Nohria head up an eminent insititution like HBS "gives added weight to the calls for change."

Goldman Sachs and Glengarry Glen Ross

Of course, it's hardly a given that influence will extend beyond the ivory tower to Wall Street. Talk of managing corporations in the best interests of "stakeholders" or society as a whole flies in the face of clear legal and institutional norms that give priority to the interests of shareholders and profitability.

Still, I think professionals looking to climb Wall Street's career ladder would be wise to consider the possibility that banking culture will bend, even if only slightly, toward the demands of industry critics. Economic considerations aside, the cultural gulf may simply be too wide to persist. Details emerging from the Goldman Sachs Abacus saga appear to cement the public's view of Wall Street as an amoral place where everyone is out to put something over on the next guy... even their own insitutional clients.

The obvious fictional parallel is Gordon Gekko, the villain of the original Wall Street movie of two decades ago who also appears in the sequel due for release later this year. Last week, Reuters' Matthew Goldstein raised another dramatic parallel: Glengarry Glen Ross. The mind-set exhibited by Goldman Sachs mortgage bond traders in e-mails released through the Senate's probe, Goldstein wrote, "would not be out of place" in that David Mamet play about dishonest real estate salesmen whose jobs forced them to "always be closing." One glaring example is executive Tom Montag praising salesman Cactus Raazi for persuading customers to lift Goldman's remaining inventory of a product that Montag himself had described with an expletive in another e-mail.

Admiration for 'Fabulous Fab'

While most of the public professes disgust for that sales-driven culture, bankers see no shame in it. In fact, more than a dozen young Wall Streeters interviewed by Newsweek voiced admiration for Fabrice Tourre, the structured products salesman who the SEC charged with fraud for his role in Goldman's Abacus sub-prime CDO deal.

One banker called him a political scapegoat. Another called him a hero...He's becoming a cultural icon to his contemporaries because they empathize with him...

To the bankers, Tourre's e-mails in which he expresses doubt about the validity of the products he's selling only make him that much more likable.

Perhaps most important of all, "Wall Street insiders predict he will easily find another job in the financial world."

A New Type of Interview Curve Ball?

That Newsweek story concludes Wall Street behavior isn't likely to change, beyond perhaps taking care not to say certain things in e-mails. I'm not convinced. If thought leaders from the MBA world are pushing for change - and Harvard's Nohria isn't alone in this respect - it could presage a new turn in corporate culture. Not a sea change to be sure, but a gradual one.

Here's one possibility: In interviews for banking jobs, the tone of questions might undergo a subtle shift toward greater focus on a candidate's ethics and social responsibility. Of course, some companies might tack the opposite way, angling to screen out candidates who come off as "too" principled. So the need to research the culture of the firm you're interviewing with is greater than ever.

All in all, financial professionals would be wise to keep a finger in the wind.

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AUTHORJon Jacobs Insider Comment
  • Jo
    Jon Jacobs
    28 June 2010

    Parrot (forgive me for replying six weeks late):

    Your argument is perfectly sound in theory, in the aggregate, and over the long term. But no individual's career (and even, to a great extent, no company's fortunes) plays out in theory, in the aggregate, or over the long term. While it's good to keep such considerations in mind when making real-life career choices, there are always practical, idiosyncratic and short-term considerations that factor in the mix as well.

    If your propositions held true with the very high confidence level you expressed, then Madoff couldn't have existed. Nor could Enron or WorldCom, for that matter.

    Of course, none of us wants to end up working for a Madoff, an Enron or a Worldcom - at least, not at the point when the devil arrives to collect his due. Nevertheless, history makes it crystal-clear that the only careers that suffer from having a disgraced employer's name on the resume are those who actually end up being personally tied to illegal or grossly unethical actions. In other words, our industry tends to be very forgiving, in that there is virtually no concept of guilt-by-association.

    -Jon Jacobs, eFinancialCareers News staff

  • de
    deadparrot
    17 May 2010

    The Parrot is back....

    Hello Jon:

    Since you responded to me; I will respond to you. This is an old post, so it will likely vanish into internet obscurity. Regardless:

    Financial systems basically only work because people trust the system (let's call this "market confidence"). If the system is crooked, it will come crashing down because it cannot be trusted.

    Therefore, the ONLY way that financial systems are sustainable is that (1) there are enforceable RULES in place; (2) the actors can be TRUSTED to work within those rules (shall we call this "integrity", for lack of a better term?).

    If "integrity" is a problem with your financial markets employer, then it is in a business which is a dead-end according to the iron laws of markets(see the economic discussion above). Therefore, it is in the self-interest of both employer and employee to exercise "integrity". If not, one or the other will eventually be culled from the system; otherwise the system would die.

    I rest my case and, please keep on goin', you give me fresh material!

  • TC
    TCWood07
    12 May 2010

    If culture changes, so too will business. If people don't like companies who engage in questionable practices, then they won't invest in them. Companies will begin to value ethics, to foresee how an action could be taken by the public at large. Lawsuits should be pushed, against the companies and the lack of ethics which they promote, instead of against individuals who are doing what they're told. Take it to the top.

  • Dr
    Dr. Chronos
    12 May 2010

    The confident and happy assertion that an "MBA Oath" will somehow change business for the better is heartwarming. That this game-changing innovation is a product of that hotbed of social interest activism known as Harvard Business School makes it even more touching. The reality, however, is that it will take more to impact a culture that elevates fraud to a cherished value, that defines ethical merely as that which is not illegal, and creates heroes of characters in suits who are better suited for tar and feathers. Perhaps the "Fabulous" Fab is indeed a scapegoat. Regardless, the sacrifice of a few goats upon the alter of justice may be precisely what is needed to convince the Fabs of the world that the pay for crime is more than just another high paying job at a respected firm. And that their potential future abodes include not merely penthouses but prison cells with a roommate named "Tiny."

  • Jo
    Jon Jacobs
    11 May 2010

    Deadparrot,

    It is heartening to see someone like you, who apparently believes all financial employers are resolutely honest, have nothing to hide, and would not hesitate to hire a candidate who made clear he'd never cut corners or operate in what he felt to be an ethical gray area (even if his boss asked him to). Someone who is willing to look past stories like this one published just yesterday - Top JPMorgan adviser says fired for whistleblowing... Wealth manager says fired for blowing whistle on client
    - and see only the good in people (including hiring managers).

    Coming after all the extreme anti-banking cynics I've seen comment here and on mainstream news sites - people who seem to see slimy banker-conspiracies under every bed - your upbeat view of the industry's ethics is truly refreshing. Can I share this please?

    -Jon Jacobs, eFinancialCareers News staff

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