Smith, 33, told one of his managers in a December 2011 meeting that he expected to earn more than $1 million a year, about double what he was making at the time as an executive director in London, according to a summary of Goldman Sachs’s investigation into Smith’s claims. He also said in the meeting that he wasn’t advancing up the corporate ladder fast enough and expected to win the promotion to managing director he had repeatedly stated as a goal in self-evaluations.
His bosses were incredulous. New York-based Goldman Sachs, the fifth-largest U.S. bank, was about to book its second-lowest profit in a decade and that year had eliminated almost a tenth of its workforce -- 3,400 jobs. The equity-derivatives desk Smith worked for in London had been told that compensation would be down “significantly,” according to the firm’s summary.
“Greg Smith off the charts unrealistic, thinks he shld [sic] trade at multiples,” one of Smith’s managers wrote in a January 2012 internal e-mail after informing him that his raise request and demand for promotion had been turned down.
Two months later, Smith made one of the most public exits in Wall Street history, announcing his resignation in a scathing op-ed in the New York Times entitled “Why I Am Leaving Goldman Sachs.” He called the environment at the firm “toxic and destructive,” said senior staff referred to clients by the derogatory term “muppets” and blamed Chairman and Chief Executive Officer Lloyd Blankfein and President Gary Cohn for “a decline in the firm’s moral fiber.”
Smith has since documented his views and experiences in a 276-page book, “Why I Left Goldman Sachs.” Published by Grand Central, it’ll be available for purchase Oct. 22.
Seeking better compensation is “the American way,” according to John Farrell, JPMorgan Chase & Co.’s former human- resources chief. “I don’t think there’s anything wrong with trying to earn more and be promoted.” He added that any writing by former employees about their old workplaces should be taken “with a grain of salt.”
The sudden and public nature of the departure caught Goldman Sachs off-guard. Smith was one of 13,000 vice presidents. Blankfein and Cohn had no idea who Smith was or why he decided to go public with his resignation, according to two people familiar with their thinking at the time.
“It makes me ill how callously people talk about ripping their clients off,” Smith wrote in the Times on March 14.
That day, Blankfein, 58, set in motion a soul-searching mission that would become a months-long investigation into Smith’s allegations. According to two people close to the CEO, he indicated he and the board wanted to know why Goldman Sachs’s radar failed to detect Smith’s dissatisfaction.
Among Wall Street firms, Goldman Sachs was dragged most publicly through Congressional inquiries over its role in the financial crisis, and it paid $550 million in a settlement with regulators. Now Goldman Sachs would have to defend its conduct again.
Jake Siewert, a Goldman Sachs spokesman, says all of the firm’s attempts to talk to Smith after his resignation were rebuffed. Jimmy Franco, director of publicity at Grand Central, said in an e-mail that Smith would not be making statements at this time.
The firm hired forensic specialists to troll through e- mails and taped conversations, according to four people with direct knowledge of the probe. It also conducted interviews with 125 employees who had contact with Smith, going as far back as his summer internship in 2000.
The results of that investigation were shared with Goldman Sachs’s board and regulators including the Washington-based Financial Industry Regulatory Authority and the U.K.’s Financial Services Authority, according to one of the people familiar with the probe.
A nine-page summary was provided to Bloomberg News. While it includes excerpts from Smith’s self-evaluations and quotes directly from internal e-mails, much is excluded. The summary does not, for example, show the context in which some of Smith’s remarks were made, leaving open the possibility of misinterpretation.