Question

Goldman Sachs was one of the investment banks involved in the 2008 financial crisis. It sold mortgage backed securities, called collateral debt obligations (CDOs) to thousands of investors. Its employees reaped lucrative commissions selling CDOs.
Four years after the crisis, Greg Smith, head of Goldman Sachs’ U.S. equity derivatives business in Europe, Africa and the Middle East, resigned. He wrote an opinion piece, published in the New York Times on March 14, 2012, about his resignation after 12 years with the bank.
He wrote about an appalling deterioration in the firm’s organizational culture. Formerly, it had centred on “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 client’s trust for 143 years.”
Smith found the modern culture destructive and toxic. He blamed senior managers for shifting away from worrying about what was best for the clients, into focusing on what was the most profitable for the firm. “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 murder) you will be promoted into a position of influence. … 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 email.”

He said that, currently, there were three quick ways to become successful at Goldman.
1.Persuade clients to buy investments that Goldman was trying to get rid of because theywere unprofitable.
2.Persuade clients to buy products that that were profitable for Goldman to sell, rather thanproducts that best suited the needs of the client.
3.Sell illiquid or opaque products, especially those with three-letter acronyms, that aredifficult to understand and may not be aligned with the client’s goals.
He concluded his op-ed with a plea for the board of directors to refocus the firm’s culture back to what it was when he first joined Goldman Sachs, twelve years ago.

What is ethical leadership? (200 words)

Answer 1

When it comes to ethical leadership this means a leader must act according to the moral principals in everyday business and decisions he make. This simply means to the right thing according to the laws and rule which govern an organization and other laws. There are although few difficulties when we talk about ethical leadership because not all the morals and principles are universally accepted. For example on issues like issues such as the ethics of animal testing, opinions differ based on religion, culture, and personal beliefs.

Another point is also comes into consideration is that sometimes one moral principle comes into conflict with another, for example the very moral that allow the freedom of speech may comes into conflict when a person who exercise his right to abuse and cuss other individuals in the company. So the very definition of ethical leadership states that a person must follow the rules and regulations and be aware of the issues that comes while following those rules and also act sensitively and ethically correct way in order to solve the problems and correct the issues. It also means that other employees also follow the rules and principles and do not involve in the unethical means to achieve the target like insider trading, glass ceiling. Many studies have found the benefits of this type of leadership like at Cornell University found that “ethical leadership was positively and significantly related to employee performance.” And in another study ethical leadership made employees less likely to leave. Given the high cost of employee turnover, this is a significant benefit.