- Now that Goldman has said it, it's true. As the financial services standard-bearer, Goldman speaks for an entire industry -- and, in this case, an industry that has not always been so concerned about public opinion when it doesn't directly involve major investors and analysts. As the elite leader, Goldman has now set a new tone, confirming the significant impact of populist reaction as it shapes, and is shaped by, media coverage.
- Goldman acknowledged the impact of adverse press coverage in the most serious possible context: an SEC filing. It wasn't just an off-handedly candid comment by Lloyd Blankfein, or some other firm spokesperson, during a luncheon speech. By including the statement in a public filing, Goldman chose to underscore adverse publicity, not as a subjective irritant, but as an objective, bottom-line factor, and materially important in determining business outcome.
- Explicitly, the firm has acknowledged that adverse publicity affects the regulatory landscape as well, with concomitant impact on business. The following language from the 10-K is pointedly relevant: "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." To be sure, the message here is that the fervor with which the financial industry has been scrutinized will not abate any time soon and that firms must weigh negative publicity as a factor that will drive intensified future scrutiny, Obama's popularity ratings notwithstanding.
- Implicitly, the firm has acknowledged that adverse publicity might actually affect client choices -- that, however sophisticated they may be, investors can be influenced by negative headlines even if they don't necessarily believe the allegations are true. On any given day, a tabloid attack on Goldman could edge a wary prospect a bit closer to Morgan Stanley (MS).
All things considered, it's a game-changer. On March 1, Goldman Sachs ( GS) filed a 10-K financial statement in which the financial giant explicitly acknowledges "adverse publicity" as a major risk factor. Adverse publicity, wrote the firm, can "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." At first blush, such an acknowledgement seems exquisitely obvious and hardly worth the press coverage received earlier this month. Even that coverage depicted Goldman's language in its SEC filing as "not surprising" amid so much ongoing criticism in the court of public opinion, including persistent controversy over executive compensation and, most recently, the firm's role in the economic crisis in Greece. Scratch the surface, however, and it's fair to say that Goldman's formal pronouncement likely received far too little attention -- that, in fact, there was something momentous about that filing when taken in full context. Consider:
Goldman Sachs has demonstrated leadership by stepping ahead of everyone else in its "official" recognition of a tangible marketplace risk. Importantly, the relevance transcends the financial services as that risk is as real for the rest of us, Main Street or Wall Street, as it is for Goldman. It cannot be ignored. Now that Goldman has codified reputational liability as a tangible business risk, what are we going to do about it? That's everyone's leadership challenge.