Fortune magazine just announced its annual list of most admired companies. Apple was number one. No surprise there. But what is absolutely amazing is that Goldman Sachs was number 8. Huh. In the very same issue of Fortune (March 22, 2010, page 70) Allan Sloan tells us how Goldman Sachs helped engineer the Greek debt crisis. It used to be that investment banks made money by helping worthy companies raise capital. Today they make their biggest money by deception and then betting on both sides of the deceit. If their timing is right, overnight fortunes are made. Sloan reports that Goldman created “Trojan Horse” securities for the Greek government to sell that looked far less risky than they proved to be because they cleverly figured out how to hide Greece’s actual financial fragility. When the country’s mountain of debt and weak economy came to light it put the entire European Union at risk. Then Goldman created credit default swaps that made them more money even as Greece’s financial stability imploded. It’s a lot like having a CPA fake your financial statement so you can get a loan and then make a bet that you won’t pay your loan off because they know the real story. Ouch.
So how can Goldman Sachs be admired in an age when corporate reputations should count for something? Well maybe it’s because the people Fortune surveys are the CEO’s directors and Wall Street analysts of the companies on their master list of contenders. It’s a questionable, some might say stupid, self-serving survey. Many people wonder if it’s a lot like asking criminals what criminals they most admire. Few could agree that Google, Berkshire Hathaway and Johnson & Johnson shouldn’t be on a great company list. But the fundamental problem is that in nearly all global surveys over 80% of consumers distrust corporate leaders to behave ethically. In the past two decades business leaders have gone from some of the most admired to the least admired in our society. CEOs can easily suffer from myopia if they only have horizontal conversations. Input from peers, directors and analysts give them a false view of reality. They need to get in touch with vertical reality. What do consumers, employees, regulators, suppliers think of their reputation? Those opinions have to be factored in to have a sense of one’s “real” corporate reputation.
Today business leaders’ credibility is street-gutter low. For leaders to delude themselves with cigar-chomping back-slapping in an age of transparency is simply foolish. Perhaps it’s time for Fortune to change its methodology or suffer the greatest failure of journalism, irrelevance.