If you’re Goldman Sachs, the answer is everyone. The company announced not long ago that their newly formed “new activity committee” will be evaluating every new transaction in which clients will be taking on new risks. The transactions will be examined for suitability, says a company release, and the company will have final approval of said transactions. Furthermore, Goldman Sachs is now intending to tie year-end bonuses directly to the client trust levels, as well as its own reputation and how employees are going about protecting it.
Is it overkill? Not if you’re Goldman Sachs, which settled its mortgage-related security suit with the SEC for $550 million. The company says it mistakenly omitted disclosures to investors in its Abacus 2007-ACI product.
That may work to instill a sense of accountability among the rank-and-file employees, but what about those at the top of the food chain? The company has policies in place now that strip away compensation in the case of individual misconduct that causes legal issues or harm to the company’s reputation. How that’s applied at the top is unclear.
Where it is clear is within UBS, which implemented strategies that put the onus of reputation risk on the CEO. The company’s nine-criteria process for CEO evaluation includes reputation.
Should bonuses be linked to reputation health? If so, how far in to the organization should it go?