Murdoch at Leveson Inquiry

Murdoch senior’s appearance at the Leveson Inquiry was always going to become a media feeding frenzy – the worst possible experience. It was always going to be an extraordinarily stressful point in his career, and no doubt he and his advisors knew that. It’s provided quotes for a dozen books or more. Below is the way the NYT saw it.

There are so many lessons in the Phone Hacking Scandal for Crisis Public Relations practitioners; so, at this stage of this long running saga, it’s worth a review of the Crisis PR basics.

We stress that there are four core personal attributes important for any individual in a crisis – and we make judgements based on our assessment of them when we plan:

1. Have a hide as thick as a rhino’s OR ‘Don’t let the Bastards get you down’ (Illegitimi non carborundum): keep your true friends close because in a crisis the rest will desert you; stay true to your values, when everyone commentating appears to think you have none; remember there is a silent majority of people out there who think for themselves.
2. Be on watch 24/7: a crisis is gruelling and relentless; have a support team, a mix of strategists and tacticians; sleep well.
3. Understand the media: the audience is bombarded by many voices – commentators competing to be heard.
4. Understand social media: now, the audience can listen to one voice – yours. Choose the channel that suits your personality.

The Three Crisis Objectives

1. First, Win the Debate
1. Do we  have the winning argument?
2. Can we set the debate agenda – daily?
3. Are we being trustworthy: accurate, honest and transparent?
2. Next, Stop the Debate
1. From the beginning of a crisis, are we working towards ending it?
2. Tacticians have to be able to judge when and how to turn off the tap, particularly media activity.
3. Now, Work to Recover
1. We start ‘working to recover’ from Day One.
2. Our reputation depends on our recovery planning and skills.

For Recovery we require 6 check-points:

1. accurate self-assessment
2. accurate assessment of community expectations
3. time
4. accuracy, honesty and transparency in frequent communications
5. preparedness to eat crow (humility)
6. patience.

At British Inquiry, Murdoch Apologizes Over Scandal

By ALAN COWELL: April 26, 2012

LONDON — After a day of testimony at a British judicial inquiry over his ties, friendships and disputes with British politicians, Rupert Murdoch returned to the witness stand on Thursday, saying he apologized for failing to take measures to avert the hacking scandalthat has convulsed his media outpost here.

“I also have to say that I failed,” Mr. Murdoch told the so-called Leveson inquiry. “I am very sorry about it.”

He said that he had not paid adequate attention to the newspaper at the center of the scandal, The News of the World tabloid, which Mr. Murdoch closed in July as the affair widened.

“It was an omission by me,” he said, adding that he wished to apologize “to a lot of people, including all the innocent people” at The News of the World, a Sunday tabloid, “who lost their jobs.”

Mr. Murdoch’s appearance offered rare public scrutiny of one of the world’s most powerful media tycoons who is usually shielded from unwelcome attention by his power, influence and wealth. His son James testified at the inquiry for five hours on Tuesday.

Over all, the questioning by the inquiry this week seemed almost deferential and genteel, in contrast to the Murdochs’ appearances before Parliament last year. There, in November, one questioner, Tom Watson, likened James Murdoch to a Mafia boss — a comparison the younger Mr. Murdoch called offensive and untrue. In July, when the two men appeared together at the parliamentary inquiry, a protester hurled a foam pie in Rupert Murdoch’s face.

On Thursday, however, the questioning seemed not to have struck any major target in the elder Mr. Murdoch’s carefully constructed verbal defenses.

And while he called his handling of the crisis a “blot” on his reputation, he seemed to emerge from two days of questioning with no further major blemishes exposed.

Casting himself as a victim, Mr. Murdoch coupled his apology with suggestions that there had been what he called a cover-up “from within The News of the World” to hide the extent of the phone hacking scandal from the owners’ top executives. And, like his son in testimony on Tuesday, he seemed to blame subordinates for not alerting him to the practices being used at the newspaper to secure its scoops.

At times contrite and on a occasionally somewhat testy, Mr. Murdoch became more ruminative and discursive, when he was allowed to dwell at some length on the future of the printed word, pondering not only the destiny of his own newspapers but, as if addressing a seminar rather than an inquiry, also ranging over the broader issue of the future of the press in the digital era.

The day would come, he said, when the news business would be “purely electronic” in five, 10 or 20 years.

He appealed directly to the head of the inquiry, Lord Justice Brian Leveson, to be cautious when contemplating any regulatory measures flowing from the hacking scandal. “The press guarantees democracy, and we want democracy rather than autocracy,” he said.

Referring to events at The News of the World, he described them as “a serious blot on my reputation.”

He said he accepted that “the buck stops with me” in cleaning up his British media outpost and that he had spent hundreds of millions of dollars in the effort to do so.

“We are now a new company, and we have new rules, new compliance officers,” he said.

Since the scandal erupted last summer, Mr. Murdoch, 81, has been forced to undertake once unthinkable measures, like the closure of The News of the World and the abandonment of a $12 billion satellite television bid by News Corporation, as questions have deepened about the behavior and ethics of journalists, editors and managers working for him.

Asked why he had closed The News of the World, Mr. Murdoch said that disclosures relating to hacking the voice mail of Milly Dowler, a teenager who was abducted and killed in 2002, had caused a wave of public revulsion.

“I panicked,” he said. “But I’m glad I did. I’m sorry I didn’t close it years ago and put a Sunday Sun in.” Since the closure of The News of the World, Mr. Murdoch has introduced a Sunday edition of the daily tabloid, The Sun.

Robert Jay, the government’s lead attorney at the inquiry, pressed Mr. Murdoch over events leading to the withdrawal of a bid aimed at acquiring the 61 percent News Corporation, the Murdoch conglomerate, did not already own in Britain’s largest satellite broadcaster, BSkyB.

Mr. Murdoch said he had delegated responsibility for the BSkyB bid to his son.

Pressed about the negotiations, Rupert Murdoch said he did not believe he had met with Jeremy Hunt, Britain’s culture minister, who was in charge of overseeing the bid. Mr. Hunt is at the center of a political firestorm over covert contacts between his office and Frédéric Michel, a representative of the Murdoch family.

An aide to Mr. Hunt, Adam Smith, resigned on Wednesday, saying in a statement that his contacts with Mr. Michel went too far, but Mr. Hunt has resisted calls from the Labor opposition for his dismissal.

Mr. Murdoch said he did not regard Mr. Hunt as a champion of his bid. “I assumed that any responsible minister would be responsible and deal with it in an unbiased way,” he said.

In addition to the investigations by Parliament and the current inquiry under Lord Justice Leveson, the British police have launched three separate inquiries into hacking of voice mail, e-mail and the alleged bribery of police officers.

So far, the police say they have arrested and questioned 26 people in the investigation into corruption and bribery. Twenty others have been arrested in separate inquiries into phone and computer hacking by journalists at News International, the British newspaper subsidiary of News Corporation, Mr. Murdoch’s global conglomerate, which is based in New York.

The scandal has sent deep shudders through British public life, with politicians of all stripes accused of currying favor with Mr. Murdoch in order to ensure the electoral endorsement and broader support of his newspapers, particularly the mass-circulation Sun.

Those arrested and bailed include Rebekah Brooks, once a high-flying editor and confidante of Rupert Murdoch. She was chief executive of News International before resigning over the scandal.

Another is Andy Coulson, a former editor of The News of the World who became Prime Minister David Cameron’s communications chief but left his job at the prime minister’s office as the scandal grew.

The Leveson inquiry has been pressing to find out how much Rupert and James Murdoch knew about the hacking and when they found out. After the newspaper’s royal reporter and a private investigator were jailed in early 2007 for hacking into the voice mail of members of the royal family, News International insisted that the practice was limited to what was termed a single “rogue reporter.”

Since then, the police have said they have found thousands of potential cases.

Mr. Murdoch said on Thursday that News Corporation had investigated its global press holdings from Australia to the United States to ensure that phone hacking was limited to its British subsidiary.

“The News of the World was an aberration, and it’s my fault,” he said.

He said News Corporation had examined millions of e-mails and had provided information to the police in Britain which “led to the arrest and terrible distress of a number of families, of journalists who had been with me” for many years.

“It caused me a lot of pain, but we did it,” he said.

Sarah Lyall and Ravi Somaiya contributed reporting.

First, Mayor Bloomberg came out in support of GS. His argument? It was right, and it was his duty to support a company in his city.

According to the Times, the mayor, who ‘has a reputation as a staunch defender of corporate culture, dropped by the investment bank’s Manhattan headquarters on Thursday in an unannounced show of solidarity’… “It’s my job to stand up and support companies that are here in this city that bring us a tax base and that employ our people,”

Then this think-piece (extract below):

The Good, Bad and Ugly of Capitalism - By Joe Nocera; Published: March 16, 2012

On Wednesday, Howard Schultz, the chairman and chief executive of Starbucks, will take the podium at his company’s annual meeting and talk about the importance of morality in business.

Yes, morality. I don’t know that he’ll use that exact word. But there can be little doubt that in recent years, especially, Schultz has been practicing a kind of moral capitalism. Profitability is important, he believes, but so is treating customers, employees and coffee growers fairly. Recently, Schultz has defined Starbucks’s mission even more broadly, creating programs that have nothing at all to do with selling coffee but are aimed at helping the country recover from the Great Recession.

In the speech, Schultz plans to make a direct link between Starbucks’s record profits and this larger societal role the company has embraced. He will make the case that companies that earn the country’s trust will ultimately be rewarded with a higher stock price. “The value of your company is driven by your company’s values,” he plans to say.

I bring up Schultz and Starbucks because this week we saw a different kind of American capitalism on display — the “rip your eyeballs out” capitalism of Goldman Sachs. ………

But there’s a reason Smith’s article has struck such a chord. It is the same reason that Goldman Sachs, despite having come through the financial crisis largely unscathed, has become the target of such astonishing venom, described as a vampire squid and the like. The reason is that the kind of amoral, eat-what-you-kill capitalism that Goldman represents is one that most Americans instinctively find repugnant. It confirms the suspicions many people have that Wall Street has become a place where sleazy practices are the norm, and where generating profits in ways that are detrimental to society is the ticket to a successful career and a multimillion-dollar bonus.

Goldman bundled terrible subprime mortgages that helped bring about the financial crisis. Smelling trouble, it unloaded its worst mortgage bonds by cramming them down the throats of its clients. It secretly allowed a short-seller, John Paulson, to pick some especially toxic mortgage bonds that were bundled and sold to Goldman clients — with Paulson profiting by taking the “short” side of the trade. Just recently, Goldman had to admit that one of its investment bankers had acted as a merger adviser to the El Paso Corporation while holding stock in Kinder Morgan, which was trying to acquire El Paso. It would be hard to imagine a more blatant conflict — yet no one at Goldman bothered to tell El Paso.

These practices may not be illegal, but can you really say they represent the values that we want to see on Wall Street or in our corporations? I can’t.

And Goldman shouldn’t either. What has been amazing is that, despite three years of nonstop criticism — including Congressional hearings and settlements with the government — Goldman has not changed one iota. That is another reason Smith’s article resonated. It confirmed that suspicion as well. Goldman’s response to every controversy these past three years has been to bury them in a blizzard of public relations. And this has been its response to the Smith article, releasing, for instance, a companywide e-mail from Lloyd Blankfein, its chief executive, insisting that Goldman does, too, care about clients. Consistently, Goldman’s attitude has been: This, too, shall pass.

So far, though, it hasn’t. And maybe, just maybe, it won’t. Maybe the time has come for Blankfein to watch what Howard Schultz is doing at Starbucks. Sometimes, the best way to do well really is to do good.
A version of this op-ed appeared in print on March 17, 2012, on page A21 of the New York edition with the headline: The Good, Bad and Ugly Of Capitalism.

Why I Am Leaving Goldman Sachs + revealing Comments below

New York Times  - By Greg Smith

Published: March 14, 2012

(See our commentary on this here)

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.
A version of this op-ed appeared in print on March 14, 2012, on page A27 of the New York edition with the headline: Why I Am Leaving Goldman Sachs.

372 Comments

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hd
New York

What ever happened to fiduciary duty???
March 16, 2012 at 2:50 a.m.
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Jorge
Stamford, CT

I beg to differ about the so called “culture”. The game has always been about swindling clients, duping shareholders and making leveraged bets with “other people’s money”– with the implicit backstop of the taxpayer. The difference, now, is that the public has grown wise to the scam and governments, fed up with footing the bill when the music stops. Stricter capital requirements and more intense regulatory scrutiny spells game over for Wall st– at a minimum, in its most profitable business as principal risk taker. Whence the present spectacle of parricide among the inner ranks. Its borne of despair…
March 16, 2012 at 2:30 a.m.
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1

Jones
New York

A man confesses. But why and what is its purpose? Now, maybe the why might have to do with the importance of the sense of self, if so, perhaps then the game of it, for the ego of the confessor, is for him to do what he needs to do to maintain the idea he has of himself and then the hoped for result, for a man who wants to confess to misdeeds, is to maybe see a new day and confront and win new victories if that is possible.

But a confession, if it is to meet the expectations of the confessor, should not inflict too much damage on the man who is after cleansing his conscience or soul, and it is important to take care when making a moral stand, because if real harm or having to make sacrifices, is the result, well, that kills the noble intent of an individual’s hoped for self-renewal.

But it is pointless really, as confessing is taken seriously only by others who don’t know any better than not to take it seriously.

And in this particular case what would have been interesting would have been a telling of what Mr. Smith had done to push back against what he saw as wrong, what he did to correct the situation, an account of what he had been doing, a description of the obstacles he had confronted, and an explanation as to why admitting defeat was the only option. But instead the man Smith ended up speaking about the proudest moments of his life, that in some way has contributed in doing harm to so many. So there it is, another narcissist who believes in self-absolution.
March 16, 2012 at 2:30 a.m.
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Will
St Paul, MN

It’s interesting seeing someone burn bridges like this, but I’m finding the tortured altruism and loss of innocence hard to swallow. The whole enterprise of Goldman and other power brokers is based on gambling, insiderdom, and perpetuating the long-standing lie that Wall Street sustainability comes from something more noble than P.T. Barnum’s axiom.
March 16, 2012 at 2:30 a.m.
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5

Robert
Atlanta

This really hits home with me. I could have written the very same article about Delta but I was afraid they would take everything away from me. When I left in 2008 I knew that some disease had spread through the company like wildfire destroying every ounce of integrity the corporation had and it had a lot. I started watching Glenn Beck after the election and he was saying everything I had been trying to say for years. There are social progressives and for lack of a better word financial progressives and they play good cop bad cop to continue their destructive assault.
March 16, 2012 at 2:30 a.m.
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Rhodes
New York, NY

I say bravo to Greg Smith… and what I’ve learned is this is not solely relegated to Wall Street. This attitude is prevalent in charity, media and business across the board. There must be a consciousness change and it looks like the 2008 financial crisis wasn’t enough of a catalyst for an existential shift. It’s time for people to do the right thing, to speak out against the institutions – We must all support Greg Smith… because I promise you the threats coming his way from Goldman and their cronies are reaching far and wide…. he is brave… and now we must help him weather the storm with our support…
March 16, 2012 at 2:30 a.m.
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Paul
Merrick, NY

I’m happy to see a Goldman Sachs insider finally admit what’s been obvious to many observers for years. What I find hard to believe is Mr. Smith’s claim that the culture at Goldman Sachs was much different when he joined a dozen years ago.
March 16, 2012 at 2:30 a.m.
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kallikak
nj

Sorry, Greg, I’m not buying it.

As someone who brushed up against Goldman on the client side in the 70s and 80s, I marveled at the firm’s unique blend of self-serving integrity: always seemingly do right by the client, but in ways that do even better for Goldman.

Where do practitioners of this warped sensibility cross the line? Sub-prime MBS? Toxic derivatives? “Helping” Greece circumvent EU guidelines?

I guess it’s finally gotten so bad that the facade can’t even be maintained internally.

Have we learned nothing from the recent debacle? The regulation and control of the financial system must rely upon something greater than the supposed integrity of the players.
March 15, 2012 at 6:20 a.m.
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Hank Van den Berg
Lincoln, NE

Smith’s contention that Goldman Sach used to care about its clients but has now stopped doing so is naive at best. It is more likely that Smith was too impressed by the phony mission statements and hype to notice the long-standing singular pursuit of profit by all Wall Street firms. Thankfully, Smith woke up to reality. But it is Smith who woke up, not reality that changed.
The financial industry in particular and the rich in general have never cared. Read F. Scott Fitzgerald, for example. Hopefully smith will use his new-found conscience to dedicate himself to building a new economic/social system. He could begin by walking over (yes, get out of the luxury car) to visit his local Occupy movement.
March 15, 2012 at 6:20 a.m.
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25

CCC
Naptown

Okay, the Occupy Wall Street crowd was ridiculed and minimized, but here’s a senior director from the biggest WS firm validating everything OWS was protesting.

So will the public take the OWS concerns a little more seriously now? Will congress?

There has to be a way to regulate these firms without hamstringing them from honest work, and without allowing them to fleece us all.
March 15, 2012 at 6:20 a.m.
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39

Adam Caper
Boston, MA

I would like to say that Greg Smith’s piece is a revelation, but, sadly, this is something anybody who’s paid attention has known for years.

I founded my venture capital firm based on the principle that our job is to do well by doing right by our stakeholders – partners, portfolio company management, clients. I chose this particular line of work because of my firm belief that much of what makes the world a better place comes from smart people applying brain power and resources to build great things. Notice that making money doesn’t enter that foundational principle; I’ve always believed that if you concentrate on building value, the money will follow. And, at the risk of appearing self-congratulatory, it has: I’m doing quite well, thank you very much.

As a bona fide innovator in our field – see http://www.synchronyvm.com – I have long been deeply troubled when members of the general public conflate what I do with the likes of the GS’s and Bain Capitals of the world. They see “investor” and think “greedy plutocrat.”

Although I can’t speak for everyone in our little piece of finance, I can say that most of the VCs I know are drawn to the field because of a genuine passion for innovation, a respect for entrepreneurs and the entrepreneurial process, and a burning desire to be involved with building great companies. In my opinion, that is the proper economic role of the finance sector up and down the stack. Sadly, as Greg points out, that ethic left Wall St. long ago.
March 15, 2012 at 6:20 a.m.
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cc spruce
philadelphia

While I appreciate the author’s bravery to speak out on Goldman Sechs’ deviant money making tactics, I would be more interested in his plans to do to correct the culture of wall street. Let’s face it, most people (some of them very smart) who chose career in wall street was in it for the money. They know that they personally don’t create anything. In the real world, people trade properties of value, including physical and intellectural properties. Money is just a medium of exchange. On wall street, people trade other people’s money. They have an entirely different perspective on money. It is really easy for young people, just out of college, to get confused when they first enter the wall street. They have to abandon their ideals of creating things for mankind. Instead, they need to come up with creative ways to grab as big chunk of the money pie on the wall streat as possible. That is their mission. The moral compass of the real world don’t apply there.

So, pointing out the greed on wall street is nothing new. I wish the author, as smart as he is, would discuss ideas of wall street reform.
March 15, 2012 at 6:20 a.m.
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<a href=”mailto:mikemcginty@comcast.net”>mikemcginty@comcast.net</a>
CT, USA

Take this job and shove it, I ain’t workin’ here no more. I wish I had enough cash to walk away and tell the CEO and our board what they’re doing wrong!

This is fantastic. Even though we have been able to smell the rotten culture of Goldman and others from far, far away for many years. Greg Smith pretty much says it all here in one page.
March 15, 2012 at 6:20 a.m.
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5

whiteyward
Cave junction OR.

This capitalist just wants the customer to tag along. His disappointment with the casino life seems a little soft. When they step forward to announce the obvious it is always a PR effort. When they become whistle blowers we have Heroes.
March 15, 2012 at 6:20 a.m.
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Theodore Koenig
Pasadena, California

Reading this article reminded me of another recent article reflecting on Bell Labs and the trajectory of development in the US.

http://www.nytimes.com/2012/02/26/opinion/sunday/innovation-and-the-bell… Labs&st=Search

While it is comforting to point the finger at Wall Street and say they are the only ones trying to make money repackaging old ideas, many others if not all of us participate in this. The other article makes an argument the gist of which is that the US now longer produces true innovations as it once did. Tech companies, another high profit industry like finance, it contends repackage and slowly advance essentially the the same products. At the same time the popularity of reality tv, while an overcited anecdote, may point to a strong desire among the general populace to hit it rich at all cost (as happens in the shows).

I am not certain how much I myself buy into all of this, nor whether it is necessarily bad. However, I believe many of the commenters whether praising Mr. Smith or skeptical of his intent should examine the US and possibly themselves, before attacking the financial industry full on.

The saving grace I see for those that cry class warfare when such attacks are made, is that perhaps we do go too far in assigning blame rather than in self reflection.
March 15, 2012 at 6:20 a.m.
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Miketcha
Higganum CT

While we all debate what has happened to America, lament the eroding of values and our society, Mr Smith exposes one of the underlying culprits, American Capitalism. Instead of being a model for building a strong and healthy society, it has become a winner take all, survival of the fittest (re: corrupt), I got mine, good luck getting yours economic model.
American corporations and financial institutions have placed profits above all other values.
We disparage the poor and middle-class for the erosion of American values, yet exalt those who can squeeze the greatest profit out of our country with no consideration for the damage to society or the environment.
Yes, “corporations are people”, unfortunately most of them are bad people
March 15, 2012 at 6:20 a.m.
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Debra
formerly from NYC

I’m glad that you were able to quit — you could do that because you probably have enough money and influence to do so. After all, you were able to contact the NY Times and tell them that you wanted to write an Op-Ed piece.

What I would love is for you to open up a new business and employ some of the downsized. I bet they would have loved to have had the opportunity to quit instead of being dumped.
March 15, 2012 at 6:20 a.m.
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Jim Macdonald
Philadelphia, PA

Great, courageous article, Mr. Smith!

And I trust you “cleaned out your locker” before this was issued! My only regret is that your piece does not mention the “elephant” in the room that no one wants to discuss, i.e., that the problems you relate are not specific to GS and, I would argue, are directly the result on the transition of investment banking from private partnerships where investments were made more prudently to publicly traded companies where a casino mentality prevails. Simply stated, there is little chance the problems you describe would have occurred had GS never gone public. We need to take a fresh look at the rules of governance for publicly traded companies, the ineffectiveness of regulations (including SOX), and the fiasco called the SEC, or the problems you site will never cease.
March 15, 2012 at 6:20 a.m.
Recommend
9

pandrews
Davidson, NC

Yes, the broker is supposed to put the client first but it is also up to the client to educate herself or himself about the various products and what will help achieve client’s goals. I am fortunate to have a financial advisor who helps me do this, and I went through several who did not before I found him.
March 15, 2012 at 6:20 a.m.
Recommend
3

Steve
NY

Wow, you mean Goldman’s goal isn’t to help their clients, or society?? (And it took you 12 years to figure this out?) Shocking.

Caveat emptor — no truer words have ever been spoken.
March 15, 2012 at 6:20 a.m.
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9

SonjaS.
Norway

Impressive and respectable.

I’ve been fearing the investment institution that you’ve resigned from for a long time, since my country owns a large sovereign fond, and our authorities appear naïve, and GS goes where the money is. Some of us fear that our country’s savings will disappear in the insecure world of the complex ‘products’.

My second thought was, ‘welcome to the age of new fascism’. When respectable institutions are overtaken by the morally corrupt individuals or worse, morally corrupt leaderships, there has arise resistance. More and more individuals will have to take a stand against such moral corruption. I’d expect more people like you to stand up and proclaim that they won’t partake in immoral activities. I know fascism is a strong word, but the conditions you describe are extraordinary, pointing to criminal mindedness combined with huge power. We live in quite scary times, it seems.
March 15, 2012 at 6:20 a.m.
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13

Juris B.
Marlton, N.J.

Hey Greg…look under the hood of your BMW before you turn on the ignition. Blankfein wants you “swimming” in the East River. Get a bodyguard!!
March 15, 2012 at 6:20 a.m.
Recommend
7

Ken Hines
Athens, Alabama

This behavior is more than a predatory relationship between GS and its clients. You and I accumulate money to meet our needs, then to secure our future, and finally to enrich our lives. Those who navigate in millions or even billions of dollars accumulate money to amass power. The huge redistribution of wealth benefiting the very few in America actually is a huge redistribution of power undermining the democracy we hold dear. The lack of oversight in this arena begets an accumulation of power that leads to less oversight that leads to more power that leads . . .

Government is the institution that provides the common man a mechanism to act in concert against such a scenario. Tax laws that inhibit such a feedback loop, and regulations that ensure a proper consideration of investors’ interests are not demons. They are the stuff of equality.
March 15, 2012 at 6:20 a.m.
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15

Jen
Indiana

I wish more people were able to speak up. It would be great if they felt comfortable enough to do it while they were working, but even after you resign, it’s still pretty brave to do it in such a public forum.

I worked for a Fortune 500 company for over 10 years. I found that people rarely speak up in any meaningful way. We were asked our “opinions” on many initiatives but it was clear the bosses were only looking for positive feedback. If you even had constructive criticism it was clear you were “not on board” and had a negative attitude. Very often, the managers say they want feedback but they really don’t. This is why I left. I liked my work but didn’t like having to be phony all the time and act like I was jazzed up about some bake sale or financial book club when I had 50 hours of real work to be doing!
March 15, 2012 at 6:20 a.m.
Recommend
8

Dan
Buffalo

Flag

I find this essay naive.

The reason why the culture changed is because the world’s surpluses are no longer being funneled through Wall Street. The system of capitalism and finance that coursed through Wall Street was undone in 2008. It’s no surprise then that the biggest firm (though more profitable than ever as a result of the stock rebound) finds itself groping for optimism. There should be no optimism. The scam of financialization will never be the same again, and the rest of the world will not trust these shysters with the massive amounts of surplus they used to funnel through these institutions. Mr. Smith benefited for 8 of his 12 years at the firm from the kind of tribute the rest of the world paid to the Wall Street masters of finance. Those days are done, no wonder the spirit and camraderie at Goldman is less than it used to be.

Image: http://www.guardian.co.uk

In fact, watch out now for copy-cat departures, partly because the letter was cleverly and well written and will impact on a lot of people (who can see it online in perpetuity) , and partly because Goldman Sachs did not respond appropriately (just read the comments below the Op-Ed to see that).

1. Be prepared. Have a crisis plan, so you have an internal process to handle this simply and nimbly. Have a strategy, and crisis team or person with decision making powers, key messages and spokespeople ready to go.
2. Respond quickly and appropriately. The problem with with the GS response (below) is that it is weak, and smacks of PR speak. Speed was good.
3. Be competent with traditional media. This is a given, but crises almost always involved traditional media and its impact on a company.
4. Be competent with social media. This is a strong reminder that if you aren’t in social media you need to be. Many of our clients become social media advocates after a crisis has escalated in social media – which could have been managed more easily if they were ‘online’ before the event.
5. Ask employees to respond online: Current and former. Not a lot, just enough to have some input – silence is damning. Outsiders want an alternative point of view. Have a look at the comments below the article. They appear to be all negative. Get the tone right – high level but not haughty, concerned but not defensive.
6. Attempt to seize the agenda. Make an announcement that creates alternative news reflecting company culture. Rupert Murdoch closed a paper – one example. Another example might be the release of a company staff satisfaction survey – if there is one. The simple denial is not always enough; that is simply referring to a negative (“I didn’t hit  my grandmother”).
7. Communicate with all relevant stakeholders. Staff first, then use a ‘ripple in the pond’ diagram. Speed is again critical.
8. Keep your head. Certainly you will be anxious, but it will pass (‘ If you can keep your head when all about you are losing theirs and blaming it on you… (RKipling))

GS PR department’s response to the New York Times:   “We disagree with the views expressed, which we don’t think reflect the way we run our business. In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.”

Click here to view the embedded video.

Now the Fukushima disaster was terrible, simply terrible. But a lot of the anger since in Japan has been directed at the people who failed to prepare a crisis plan and those who bungled the aftermath; the lack of planning and communication comes up again and again.

The QANTAS crisis last year on the other hand is a textbook example of what can be done to prepare and respond – and despite the exceptionally inflammatory situation the reputation damage has been minimal.

And the Murdochs? Well that’s a wonderful case study of how to a set the news agenda to minimise damage. Now you can be cynical about it but closing the News of the World, then opening the Sun on Sunday;  not to forget Murdoch senior’s tweeting, created headlines and showed us another side of the Murdochs. The phone hacking may be deplorable, but those other qualities are more admirable.

New Sunday Edition Signals That Murdoch Is Fighting Back

By JOHN F. BURNS and AMY CHOZICK

Published: February 25, 2012

LONDON — For the past week, it has been just like old times: Rupert Murdoch, shirtsleeves rolled up, bossing the newsroom of the country’s leading tabloid newspaper as if he had not been away building his media empire in America for much of the past 30 years, as if the impact of the phone hacking and police bribery scandals embroiling his British newspapers could be rolled back by the sheer force of the proprietor’s will.

Mr. Murdoch, who will turn 81 in two weeks, has taken on-the-spot command of the project he announced after flying in from New York 10 days ago: After more than 40 years as a Monday-through-Saturday paper, the rambunctious tabloid he built into the country’s richest and most widely circulated paper, The Sun, is becoming a seven-day-a-week operation, publishing this Sunday for the first time.

But The Sun on Sunday is more than a new step down the path Mr. Murdoch has worn as a newspaper pioneer — and it has more in its implications for the News Corporation, the $40 billion company he built from his long-ago start as the owner of two newspapers in Australia, than the relatively modest gamble in terms of start-up money, many newspaper analysts say.

For Mr. Murdoch, and the staff at his British publications, the true significance of the new Sunday paper seems to be that it, in effect, draws a line in the sand. With the founding of The Sun on Sunday, Mr. Murdoch appears to have declared that his tabloid will not be hounded into oblivion by the opprobrium that has beset The Sun and The News of the World, the weekend tabloid he shuttered when the phone hacking scandal broke wide open. About 30 of the papers’ current and former employees have been arrested and released on bail on suspicion of criminal wrongdoing in the hacking and bribery scandals.

Mr. Murdoch raised the battle cry in an e-mail to The Sun’s staff he drafted last week as he crossed the Atlantic in his corporate jet. “Having a winning paper is the best answer to our critics,” he said, announcing the new Sunday paper.

To this, he added a change of course aimed at quelling an incipient rebellion among The Sun’s staff. While continuing to hand the police “every piece of evidence we find” of wrongdoing by staff members “because it is the right thing to do,” he said, he was lifting the suspensions of all those arrested — at least “until or whether charged” — and ordering the company to pay all their legal expenses.

The decision to invest in The Sun is not without its risks: although the cost of the new venture is estimated at only tens of millions of dollars, some fear it could sap Mr. Murdoch’s focus from other parts of his empire. And even a brilliant success would not erase the litany of expensive legal and other problems caused by the reporting scandals.

With nine recent arrests at The Sun, Mr. Murdoch faces a crisis that is, if anything, more serious than the phone hacking scandal, involving accusations that staff members bribed an array of public officials, including police officers and military personnel, for leaks that formed the basis of many of the paper’s scoops. If any of those questioned by the police are charged and convicted, News Corporation could confront heightened scrutiny in the United States under the Foreign Corrupt Practices Act, which makes bribery of foreign officials by American companies and their overseas subsidiaries a criminal offense.

To many who have known him for years, the decision to mount a counterattack at a moment of vulnerability is classic Rupert Murdoch. That he should be doing this at Wapping, News Corporation’s base in east London, they say, adds to the drama. It was Mr. Murdoch’s decision in the 1980s to move his newspapers to computerized newsrooms and a digitalized printing plant in Wapping — precipitating one of the most violent labor disputes of the Thatcher era — that cemented his reputation for taking on tough battles, and winning them. Many in Britain still see the Battle of Wapping, as it became known, as having saved Britain’s newspapers.

He is also working with some practical advantages. Since his decision to abruptly shut The News of the World, News International, the British newspaper subsidiary of the United-States based News Corporation, has had underutilized capacity on its printing presses. It has enough staff for the new edition, from the weekday Sun and survivors of News of the World, and advertisers are said to be hungry for a new Sunday paper to fill the void left by The News of the World.

But most of all, the venture has the personal commitment of Mr. Murdoch, who cut an aging, exhausted figure when he appeared last summer before a parliamentary committee investigating the phone hacking scandal, only to return, according to some in the Sun newsroom, as his old scrappy, innovative and contrarian self.

But there are many at high levels of the News Corporation, and among investors, who regard his commitment to the new Sun edition as a distraction from the more important business of managing the company’s lucrative non-newspaper assets. Those include the Fox television channels in the United States and their counterparts at the British broadcaster BSkyB, and the Twentieth-Century Fox film studios in Hollywood, now the core of News Corporation’s profits.

Many in Britain had speculated that the News Corporation chairman would respond to the spate of Sun arrests by replicating the shutdown of News of the World.

Those who worry about the focus on the new Sun edition include three former News Corporation executives interviewed for this article, for whom News Corporation has become a sports and entertainment company with a newspaper problem, rooted in Mr. Murdoch’s predilections. “Designing and launching a new newspaper is his favorite thing in the world,” one of the former executives said, speaking as all three did on the condition of anonymity so as to be able to discuss News Corporation’s problems candidly. “This is catnip for him.”

Another former executive was blunter. “Let’s just accept that these are toxic properties,” he said, referring to the British tabloids. “They’re severely damaged, and have no value to anyone other than him,” he said, referring to Mr. Murdoch.

But admirers of Mr. Murdoch have taken another view. William Shawcross, a British author and longtime Murdoch friend, lauded him in a column this week in The Spectator, a journal that has often excoriated Mr. Murdoch on the tabloid scandals. “While other newspaper proprietors are in retreat all over the world, and while Murdoch himself faces the greatest-ever threat to his empire as a result of the phone hacking scandal, he charges the barricades, confounding his enemies,” Mr. Shawcross said.

Nor have the plaudits come only from friends. The Guardian, which led the reporting in Britain that forced Scotland Yard to reopen its investigations into the tabloid scandals, ran an editorial last week praising the man who has so often been its nemesis. “The old newspaperman remains the arch-magician of print — wrong-footing his critics, rallying his staff and stunning his rivals with his sheer speed and audacity,” the editorial said.

Insiders in the Sun newsroom have described Mr. Murdoch working alongside editors to commission columns for The Sun on Sunday, hire columnists and assign stories for a paper that insiders say will aim at retrieving up to 1.5 million of the 2.7-million weekly sales that were lost with the close of News of the World.

Meanwhile, Mr. Murdoch has taken on the task with what those working with him have described as a giddy enthusiasm. He scrapped plans to fly to Hollywood on Sunday for the Oscars to show support for Fox Searchlight’s “The Descendants.”

But nothing has captured his mood better than his Twitter feeds. “Great staff tired but excited for Sunday edition,” he wrote on Wednesday. Then, on Thursday, he showed his accustomed concern for the bottom line. “We’re completely sold out for advertising!” he wrote.

John F. Burns reported from London, and Amy Chozick from New York.

Now two big agenda-setting events at News International:  starting a new Sunday tabloid, The Sun on Sunday; and the return of Lachlan, replacing  the reputation battered James.

Lachlan, has been in, then out, now in again.

This is vintage RM, the ever-clever strategist, but dare we say, also the efforts of a loving father.

Recent History

Recently, Lachlan has been quietly making a success of himself, building his own media empire in Australia. He’s chairman of the Ten Network; he has a a 50 per cent stake in DMG Radio Australia, which owns the Vega Classic Rock and Nova FM networks, and an 8.9 per cent shareholding in the regional television Prime Media Group.

But it wasn’t always this positive. As The Guardian noted in 2005, when Lachlan resigned as an executive (Dep COO) at the News Corp media empire:

“His resignation puts his younger brother, James, the chief executive of UK satellite TV company BSkyB, in pole position to succeed their 74-year-old father at the helm of a global empire that stretches from the Fox film and TV business to newspapers such as the Sun and the Times.”

This was after Lachlan made negative headlines (2005) giving evidence in the Australian Securities & Investments Commission’s $92 million civil action against former One.Tel directors Jodee Rich and Mark Silberman. At issue was his unusual memory loss over his role in One.Tel leading up to its disastrous collapse in 2001. As Andrew Main (AFR) who followed the court case was quoted at the time: “It’s not been very edifying listening to a succession of “I don’t recalls” from a young man who’s clearly pretty smart.”

Well,  now in 2012 it’s James who’s being accused of memory loss, and Lachlan (lessons presumably learnt) who’s assisting with the rescue in London.

Rupert has an uncanny ability to make the most of terrible situations. That’s one of the factors that has helped him create his  remarkable empire.  It may be that it comes naturally (becoming a Twitterer, opening a new paper when most people would be hiding, re-introducing Lachlan), but from a Crisis public relations point of view he’s ticking almost all the boxes.

Below is an extract from best article we’ve read summarising the current situation, from the NYT:

Murdoch Visits Downcast Tabloid, With Other Son in Tow

By JOHN F. BURNS and RAVI SOMAIYA, Published: February 17, 2012

In a gesture aimed at restoring morale in his battered newspaper empire in Britain, Rupert Murdochwalked the floor of his flagship British tabloid, The Sun, on Friday with his son Lachlan, ordered an end to the suspensions of reporters and editors who have been arrested in a Scotland Yard corruption scandal and announced a new Sunday edition.

In crisis public relations, for recovery we require 6 check-points:

1. accurate self-assessment,
2. accurate assessment of community expectations,
3. time,
4. accuracy, honesty and transparency in frequent communications,
5. preparedness to eat crow, and
6. patience.

What many people seem surprised at, no surprise to the Australians who have observed RM for decades, is that he says exactly what he thinks. That kind of directness seems to work well on Twitter. Below the NYT calls Murdoch’s tweeting, ‘almost cute’.

We would expect RM to have a keen understanding on community expectations (point 2 above) – afterall, that’s what tabloid journalism is all about.

Would is work for son, James? 

A Glimpse of Murdoch Unbound

By DAVID CARR

Published: January 29, 2012

As American business has become more and more media savvy, its leaders have appeared in media less and less. Business reporters have to work their way past background conversations with underlings, written statements that state nothing, and that increasingly hardy perennial: the “no comment.” The modern chief executive lives behind a wall of communications operatives, many of whom ladle out slop meant to obscure rather than reveal.

But, Twitter has the potential to cut past all that clutter.

………………….

… His posts are devoid of nuance, partisan in the extreme and prone to crankiness, all consistent with the Rupert Murdoch we have come to know.

In the middle of January, when it became clear that the ill-conceived legislation to prevent piracy was going nowhere, his anguish and anger squirted out in 140-character bursts, day after day, leaving little doubt about whose ox was being gored.

He took on the president: “So Obama has thrown in his lot with Silicon Valley paymasters who threaten all software creators with piracy, plain thievery.”

He took on Google: “Piracy leader is Google who streams movies free, sells advts around them. No wonder pouring millions into lobbying.”

And he took on movie stars: “On SOPA, where are all big film stars with many millions to lose?”

He even responded to pushback from users who suggested that people who run companies that hack phones should not give lectures about piracy:

“No excuses for phone hacking. No argument. No excuses either for copyright stealing, but plenty of ignorant argument!”

And just in case we still weren’t sure these posts were the unadorned handiwork of somebody not used to typing or computing, there was this gem:

“Seems like universal anger with Optus from all sorts of normal supporters. Maybe backing pirates a rare miscalculation by friend Axelrod.”

He meant “Potus” — for president of the United States — and blamed the autocorrect function on his iPad for the goof, but the rest of the message was vintage Murdoch.

To the first question, 3 points below:

♥ Be brave enough to make (small) mistakes, but only once. I’m not down on these guys; please keep at it. I would rather support Qantas and McDonalds who are really trying for my loyalty, than a company that is not. In their own sectors, Hugos Restaurant (Manly) and JB HiFi are doing really interesting online activities. Watch also The Daily Tele SmartEdition (none of the companies mentioned are clients).

♥ However, as carpenters say: ‘Measure Thrice, Cut Once; Measure Once, Cut Thrice’. Or, think things through. In hindsight it is obvious, what should have been clear in foresight, that such #suggestions were always going to bring out the best and worst in headline writers and smart alecs. As one article, “McDonald’s Twitter Campaign Backfires”, quoted one user: “@McDonalds scalds baby chicks alive for nuggets,” – retweeted 100+ times.

♥ Remember the 3 Dribbles – the checklist essentials for any brand campaign – all possibly forgotten these two times: will it make us  (in the eye of the beholder) more credible, desirable, reliable.

The story written by Tim Lince of Influencing PR is here (you may have to register).

To the second point? It takes 6 elements in Twitter comms for recovery:

• accurate self-assessment,
• accurate assessment of community expectations,
• time,
• honesty and transparency in frequent communications,
• preparedness to eat crow, and
• patience.

Rupert Murdoch is making a fist of it. @rupertmurdoch - 160,000+ followers and climbing; following 18.

Image: http://www.vegau.com