Near-Universal Hatred of Goldman Sachs May Cost Them Money
Most of the time, universal condemnation of a company’s business practices leads to little more than some unflattering newspaper articles, unmet calls for a boycott and the eventual collective amnesia. But Goldman Sachs — despite the fact that it’s far from a retail business — is already warning shareholders that the criticism of its shady practices, such as its currency trades with Greece, may have a negative effect on its business. The New York Times reports that in Goldman’s recent SEC disclosure, Goldman specifically identified bad press as a potential risk of which shareholders should be aware.
“Press coverage and other public statements that assert some form of wrongdoing, regardless of the factual basis for the assertions being made, often results in some type of investigation by regulators, legislators and law enforcement officials, or in lawsuits,” the firm added. The filing goes on to note that the cost of responding to these issues is both time-consuming and expensive and that the “adverse publicity … can also have a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations.”
Of course, if Goldman had chosen to identify the potential public relations risks of its business practices, like helping a country hide the true value of its sovereign debt, then the risk of those transactions coming to light and hurting the company could have been ameliorated from the beginning. So, either Goldman isn’t as good at evaluating risks as it tells clients that it is, or it decided a long time ago that the money it would make from even transactions that carried a severe public relations risk would be greater than its losses.