 Lest We Forget
At 5:30AM on September 15th, 2008 my blackberry buzzed with a message from the President of my biggest hedge fund client: ‘I want to see every mortgage, commercial real estate, abs, and leveraged loan guy from Lehman.’ In the blink of an eye talented individuals who were normally untouchable were without jobs. Lehman filed for bankruptcy protection and in doing so wiped out the wealth they had been creating for themselves and their firm virtually overnight.
Six months earlier traders, sales people, bankers and analysts from Bear Stearns streamed through the doors of my office jobless and penniless. Shell shocked, angry, scared and depressed are some of the adjectives used to describe the way they were feeling. Without warning the life they had come to know, love and count on was over. “Never in my wildest imagination did I think this could happen” was the mantra repeated by all of them.
Some of the 10,000 people from Bear and the 25,000 people from Lehman were able to find jobs; most of them at steep discounts to what they were used to earning. Many others were thrust into a market that was imploding and held little promise of employment. We were all asking the same question: How could this happen to the greatest financial system in the world?
As we look back at that tragic day there are 2 things we should be asking ourselves. How did this happen and what have we learned from it?
It happened because the street was singularly focused on short term profit without regard to how that profit was actually being generated. The cornerstone fundamentals of good business, value and trust, were ignored. Without these basic ingredients it is impossible for any business to remain intact. Sooner or later, as the world witnessed, the system will implode. Ironically, every single person I spoke to agreed. They knew it couldn’t last, they just never thought it would get that bad.
The greatest lesson from the Great Collapse is so simple it is almost comical (yet there is nothing funny about what happened over the past year). Profit at any cost, profit at the expense of others, take the money and run, short term self centered focus and ignoring the basics like trust, integrity and value do not work and cannot last. Looking ahead the industry faces many challenges as we attempt to rebuild the global economy. The businesses that understand these fundamentals of good business will prosper over the long term. I am hopeful this will result in something good arising out of the ashes. Lets all hope that we never forget September 15th 2008.
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Summer 2009
"We are painfully conscious of the importance in being a force for good."
Goldman Sachs, July 2009
It’s been a tough year to do business on Wall Street. The financial industry is suffering not only from radical changes in the marketplace, but a public image crisis of monumental proportions. Firms that serve the bottom line and struggle to right the sinking ship are at risk of harsh political and public criticism.
Trust in business has a direct impact on revenues by attracting both customers and investment. It will take a long-time before Wall Street gains the trust of the American and global public again. Firms can begin to re-create trust in the marketplace by developing mandated internal and external ethics programs.
In February 2009, Goldman Sachs’ CEO Lloyd Blankfein, told the Financial Times,
"Financial institutions have an obligation to the broader financial system."
The clear meaning of this statement is that "we" (the business community) are all in this together. If one firm operates in an ethics vacuum, the whole industry suffers. Understanding that the free market system depends on "ethical self-regulation" is the glue that will put the broken markets back together.
Blankfein also stated, "We depend on a healthy, well-functioning system, but we failed to raise enough questions about whether some of the trends and practices that had become commonplace really served the public’s long-term interests."
To bring that "healthy, well-functioning system" back to life, we need to ask honest questions about market practices. One of the crucial business questions firms need to ask is: Are the products and services we provide creating something of value for the public and the economy’s long-term interests?
Creating value products and services that enhance people’s lives rather than destroy them is the first step to rebuilding a healthy economic system.
Ethics are more than words on a paper or in press releases. Building trust and integrity begins with industry recognition of its obligation to the common good and becoming a proactive and key player in establishing that common good through ethics mandates.
The firms that recognize these principles and actively create programs that incorporate long-term public interest into the bottom line will emerge as the Leaders of the New Economy.
PETER RESSLER is Chief Executive Officer of the Ressler Mitchell Group in New York catering to Wall Street's Elite. Peter's legendary reputation as the "best in the business" in financial recruiting combined with international renown as a leader in values-based and socially responsible business makes him one of the most unique voices on the Street. He is also a volunteer firefighter and a member of the Firefighter Assist Search Team in his local community. As a business ethics expert and Wall Street veteran, he has been called, "The Sage of Wall Street."
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The Credit Crisis: Business is Personal
EVERYTHING WE DO IN BUSINESS IS PERSONAL. In my 28 years working in financial recruiting on Wall Street I realize that my career was built through the relationships and trust I established with other people.
The late Michael Mortara is a perfect example of how business is personal. Mike was a partner at Goldman Sachs in charge of Global Fixed Income. He was also one of the founders and creators of the Mortgage Backed Securities (MBS) market. I worked with Mike for over a decade as CEO of the sole retained search firm for the Fixed Income Division at Goldman.
When we first began working together, Mike wanted to know all about my background, where and how I grew up, my interests and passions. He was as interested in who I was as a person as my ability to perform my job with excellence. In many ways, his understanding of the personal aspect of a business was the secret to his enormous success. Colleagues and associates loved Mike personally and professionally. Many of the Goldman partners he introduced me to twenty years ago are still my clients today. Our relationships are based on trust - the glue that holds all successful business relationships together.
In November 2000, Mike died suddenly of a brain aneurism. At his funeral, senators, heads of investment banks, hundreds of Wall Street colleagues, long time Goldman partners and approximately half the janitorial staff of Goldman Sachs were in attendance. From janitors to senators, people memorialized Mike with stories of the impact he made in their lives. It seemed he helped thousands of people in his brief life. Tents were set up outside the church to accommodate the large crowds gathered to pay tribute to a man who understood that everyone we come in contact with, regardless of their station in life is a human being first and should be treated with dignity and respect.
Forgetting the personal aspect of business can be career suicide. The current credit crisis is a great example. Homeowners, speculators, bankers, investment bankers, traders and investors all contributed to the meltdown of the subprime mortgage market. Record numbers of foreclosed homes, tens of thousands of jobs lost, and careers ruined. People’s lives have been forever changed. Mike as one of the founders of the MBS market never forgot there was a human being at the other end of the transaction. His view of business was that everyone could win, the investor, the banker, the homeowner, if you treated them right.
When we forget there is a human being on the other side of every transaction in business the results are disastrous. To avoid another catastrophe in the global markets like the current credit crisis each of us must remember individually and collectively that business is always personal.
© Good Business International, Inc. 2009
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