Will Goldman Sachs Stock Tank Because of Toxic Culture
As of Wednesday's stock market close, Goldman Sachs stock lost 4.17 points to end up the day at 120.37 a loss of 3.35%. Is this because of an article at the Christian Science Monitor outlining a letter by former Goldman executive Greg Smith calling the culture at the firm as "destructive and toxic as I have ever seen". With a very low opinion of the shenanigans going on at Wall Street firms and the way they have seemed to prosper and given out large executive bonuses even when the country went through the recent financial crisis of 2008, this cannot fare well for Goldman stock.
The article goes on to say:
Smith’s description of the firm fits with Main Street’s perception of Wall Street these days. Despite the run-up in the stock market, many people view Wall Street as a place where fat cats rake in huge bonuses, and lobby aggressively against attempts by Congress to rein in their activities.
“Wall Street is not held in high regard so this is certainly not going to help,” says Dennis Jacobe, chief economist at the Gallup Organization in Washington. “I think one of the things that is under-perceived on Wall Street and many of the financial sectors is how badly the financial crisis has hurt the reputation of everyone involved with Wall Street.”
In a survey published last December, Harvard’s Center for Public Leadership ranked Wall Street at the bottom in terms of American’s confidence in its leadership. Congress, the media, and the White House all ranked higher.
Even long-time Wall Street observers agree that the perceptions are distinctly negative.
“Wall Street is not doing a very good job of explaining its importance to the economy and the good it does,” says public relations executive Richard Torrenzano of the Torrenzano Group and a former spokesman for the New York Stock Exchange. “It helps corporations and new organizations raise money in a public environment, and that money is used to build new plants, create jobs, and really help the quality of life in which we live.”
However much good Wall Street does is far overshadowed by the public’s memory of 2008 financial crisis, which ultimately lead to the Great Recession.
“People will always be suspicious of banks,” says Hester Peirce, a senior research fellow at the Mercatus Center at George Mason University and a former Securities and Exchange Commission official. “Part of the reason is that Main Street has suffered so tremendously, and people are still mad at the banks getting all the money they got.”
That's certainly not a very good opinion of Goldman and one that is more than likely to give investors a weary eye towards putting much of their money in the firms stock. How this letter plays out in the coming days may determine for some time the continued price of Goldman Sachs stock. If you are invested in Goldman it may behoove you to keep a close eye on your investment.