Financial Malfeasance Is Stickier Than Oil

BP’s standing in the business and public spheres will bounce back faster than Goldman Sachs’. Pro or con?

Pro: BP Had No Ill Intentions

Both BP (BP) and Goldman Sachs engage in complex, risk-prone businesses. Both must comply with numerous regulations. But BP had a terrible accident, and Goldman had its veil pierced in public when the Securities & Exchange Commission charged it with making misleading claims about one of its products to investors. BP has been quick and steadfast in presenting trusted company representatives to address the situation. Goldman stepped out only briefly to address the economic disaster in which it had a role and from which it profited nicely. Goldman made no attempts at humility whatsoever.

BP CEO Tony Hayward has been highly visible, providing frequent updates on efforts to contain the situation. Transparency, access, and accountability have long been part of BP’s PR strategy. In 2000, BP launched its "Beyond Petroleum" campaign to demonstrate substantive changes to its mission and culture by committing to social and environmental well-being and investments in alternative energy.

Goldman believes disasters are not its responsibility, despite its willful behavior and quick acceptance of $10 billion in taxpayer TARP money. Goldman may not lose droves of clients in the near term, but the cavalier attitude of Wall Street executives and calls for financial reform will keep it in the headlines and reinforce its reputation as the Rasputin of Wall Street, which may lessen its ability to recruit talent and compete for business.

Twenty-one years after the Valdez disaster, Exxon (XOM) is thriving despite its gross mishandling of communications during an easy-to-manage, pre-Internet news-cycle period. BP’s operational issue may take longer to resolve, but its past investments in its reputation and current commitment to managing it will make the company stronger. BP will be seeking forgiveness in the hopes that soccer moms and hockey dads don’t feel like they are supporting evil by buying BP fuel.

Con: The GS Problem Is More Easily Fixed

In the end, Goldman Sachs (GS) comes out with a cleaner reputation than BP, even though the company is the latest poster child for the reckless practices of Wall Street. Even under threat from the U.S. government, there appears to be unanimous support from U.S. and global corporate entities—the core of Goldman Sachs’ unrivaled industry success. If the future brings a guilty verdict, the worst possible outcome is Lloyd Blankfein gallantly falling on his golden sword as the scapegoat for the Teflon-branded Wall Street icon. We have witnessed many financial institutions stand up before Congress and continue on intact. Once the economy stabilizes, Wall Street’s problems will be long forgotten. That’s the American way.

On the other hand, BP can look no further than rival Exxon to fully comprehend what lies ahead. The Exxon Valdez disaster took place 20 years ago and the consequence of that spill is forever synonymous with its brand. The environmental catastrophe surrounding BP—the cause of which, an oil-rig explosion, killed 11 men—is unprecedented.

Every day, thousands of gallons of crude have been spewing into the Gulf of Mexico and have already negatively affected the lives of human residents and wildlife and the economies of every state in the region. If commercial shipping, energy production, and the commercial and recreational fishing industries grind to a halt—along with the crude blanketing every beach community from Key West to Galveston as the summer season approaches—the area still reeling from the effects of Hurricane Katrina could experience economic ruin.

Will this disaster financially hinder BP’s ability to make billions? Never! But because of the harm it’s caused to commerce and the ecosystems, BP will be forever branded as the facilitator of the worst environmental disaster, excluding Chernobyl, in history. No brand can shake that stigma.

In the end, Goldman Sachs receives a lashing but maintains an unscathed reputation and brand.


Opinions and conclusions expressed in the Bloomberg BusinessWeek Debate Room do not necessarily reflect the views of Bloomberg BusinessWeek, BusinessWeek.com, or Bloomberg LP.


Reader Comments

Real World 2010

Anyone who would transact with Goldman after they have shown their true colors deserves to be ripped off. Goldman makes Merrill Lynch look honorable.

Tanya Payne

I think it's safe to say both companies have breached public trust and caused massive damage to their reputations, and worse...peoples lives.

The things is, I expect Wall Street scions to be money-grubbing and dishonest...so the Goldman Sachs debacle was too late as far as removing the rose colored-lenses.

At this moment, BP is more damaged to me. The already-decimated Gulf region, the long-term environmental damage...as Mr. Handelsman stated, "BP will be forever branded as the facilitator of the worst environmental disaster, excluding Chernobyl, in history." A distinction rightly deserved.

Handelsman's point "Once the economy stabilizes, Wall Street’s problems will be long forgotten. That’s the American way." stings with it's brutal honesty. Keep us in the money and we're easily duped, or is it just lulled into submission?

d Cortex

Neither company will ever recover their "reputation" as neither had a "good" reputation to begin with.

johnleee

I don't think that BP deserve to be branded as an environmentally destructive company because they have no ill intension, and it is merely an accident. Blaming someone (or in this case a comany) for an accident is just cruel.

Boldman Taxx

I think both BP and Goldman Sachs are badly behaving corporates.

Both have "gamed the system" and have no corporate moral compass.

Both of them are worthy of large fines to make an example out of them.

Wouldn't shed a tear if both disappeared from the corporate scene.

Time for some new responsible corporations to take their place would be welcome.

Sohan L. Jindal

B. P. is doing its best to plug the leaking well, but it is depending on the skill of people who are its employees or the scientists in the USA. I think it should hold a world wide competion for suggestions from skilled and unskilled world over and check the suggested technique in a fluid mechanics laboratory before trying it on the well. I discussed possible suggestions with my colleague and mentor in India and we both have ideas to sole this problem of plugging the leak.

To control the damage to beaches we can use bricks made from rice husk ash, coal ash, or the ash itself, which is a much better absorbent of crude oil as compared to the sand bags being used in Louisiana.

Mark

Both reputations have been tarnished and will take a long time to be back to where they were. The CEOs must be accountable for their actions and be penalized on their huge compensation packages.

Malika Ramadhani

I think BP will need a very good long-term strategy for recovery from this disaster, because this is happening under their responsibility & they are automatically becoming the major "cause."

Different with Goldman Sachs that did not "directly contribute" to this disaster.
But if the public got a clearer view and are truly conscious that both of the companies are responsible for it, they will need to work together to regain their reputation, which is not easy at all.

Ken

BP provides a product that reaches the most common of consumers, while GS pretty much deals with a limited group. Despite the similarities in their problems, I think BP will be able to reach out directly to people far easier than GS. Like, say, free nachos with every fill-up. Let's see GS top that!

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