A Lesson in Public Speaking

Goldman Sachs CEO's off-hand comments are a textbook case of what not to say at an investment conference.
Lisa YoonFebruary 5, 2003

Sometimes it’s best to stick to the script.

Henry M. Paulson, Jr., chairman and CEO of financial-services firm Goldman Sachs Group proved just that when he discussed the possibility of future layoffs at the firm at a recent investment conference, according to the New York Times. The comments were in response to a question posed by a member of the institutional investor audience.

The Times notes that when Goldman employees got wind of Paulson’s remarks, many were so offended that he felt compelled to send out a company-wide voicemail apology over the weekend. “I don’t want to sound heartless,” he said at the conference, but “in almost every one of our businesses, there are 15 or 20 percent of the people that really add 80 percent of the value.”

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What he meant, as investors understood Paulson, was that in a downturn Goldman would retain and reward employees whose performance is in the top 20 percent. But apparently, Paulson wanted to be clear. So he went on, saying that if the economy got worse, “we will take more people out” of the firm. He added, “I think we can cut a fair amount and not get into muscle and still be very well positioned for the upturn.”

Many of the firm’s employees, some of whom are investment bankers and analysts making more than $1 million a year, were appalled, interpreting Paulson’s comments as a contradiction to the firm’s “we’re all in this together” philosophy. “Internally, it was a real problem,” one high-ranking employee told the newspaper.

Another employee told the Times, “People here are very upset. We’ve always been told that it’s about teamwork and not a star system.” Last year, Goldman eliminated 2,900 jobs, or about 13 percent of its staff.

Paulson may have averted total public relations disaster by apologizing for his off-hand comments sooner rather than later. Upon hearing about the grumblings, he considered delivering an apology to a small group of employees as he met with them over the next several weeks, a source told the Times, but decided that he needed to explain himself right away.

Monday morning Goldman employees checked their voice messages to hear Paulson apologizing for a “glib and insensitive response” in discussing the possibility of future layoffs at Goldman. “I am profoundly embarrassed about my choice of words,” Paulson continued, adding that his comments had “created an impression completely at odds with my respect for the people who have been let go…[P]lease accept my apologies and gratitude.”

The apology was a rare move for Goldman’s management, notes the Times, with some company veterans saying it was unprecedented during their tenure with the firm. Interestingly, the paper of record also notes that Paulson’s remarks about employees made less of an impression on investors who were too busy worrying about Paulson’s “dour” outlook for the future.