SEC Investigates Goldman Sachs Fraud

The Gold Standard No More?

In a provocative IAM blog, Joff Wild asks will the Goldman Sachs brand be irreparably harmed from the SEC fraud investigation whether it secures a conviction or not? “Will Goldman Sachs pay a long-term reputation price for its current woes?”

There is no way of measuring the precise impact, but the investigation for what may have been systematic fraud would have to affect at least some transactions and clients. The more important question is what will it take for GS to recover?

Reestablishing faith in banking system and financial institutions will go a long way to helping. Investors, regulators and individuals must see that Wall Street is not being held to a different legal standard than Main Street because its members wear white collars or because they are needed to lead the economy back from the financial ruin they may have helped to instigate.

If convicted GS will at some point need to admit its lapse (if that indeed is what is was), expect that some officers will serve jail time and explain what measures are being taken to prevent fraud in the name of profits from recurring. It will also need to hold itself to a standard that exceeds any current legal requirements or future ones being proposed by the Obama administration.

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The best thing that can happen to GS and for banking is for people to see that financial crimes do not go unpunished, and that they are an aberration, not a way of life. For hallowed brands like GS and other intangible assets there is no substitute for reliability and consistency of purpose and message. Brands imply higher quality and endure because good managers make sure they represent real values.

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No aggressive advertising or public relations campaign can repair the damage sustained by a brand if core values are in question.

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