Student Research Projects

Ethics And The Financial Services Industry: A Case Study of Goldman Sachs

Student Aaron Murphy, ‘13
Faculty Mentor(s)
Department Management, Business and Economics
Course MBE 400: Senior Seminar: Management Ethics


Goldman Sachs has long been considered the world’s premiere investment bank. However, the 2009 financial crisis revealed a firm with a “win-at-all-costs” mentality and a willingness to flout accepted ethical standards. This reality informed many of Goldman’s decisions and played a key role in actions that flirted with the grey edges of the law and often crossed the line into blatant illegality. This research provides an analysis of Goldman Sachs and its pattern of unethical action through the examination of three specific case studies. The first study concerns the ongoing shareholder case against Goldman, Richman v. Goldman Sachs Group, Inc. I analyze the external circumstances surrounding the case, SEC documents detailing alleged fraud, and Justice Paul Crotty’s published opinion on Goldman’s motion to dismiss plaintiff allegations. This investigation reveals repeated fraudulent actions on the part of Goldman Sachs, including flagrant breaches of the firm’s own code of ethics. The second study focuses on Goldman’s role in masking Greek national debt during the country’s attempt to join the European Union (EU) in the early 2000s. An analysis of published articles, investigative pieces, Goldman statements, and EU documents and laws reveals activities that, while not illegal at the time, Goldman Sachs’ actions violated the spirit of the EU’s Maastricht Treaty and Goldman’s stated ethical obligations. The third study elucidates Goldman Sachs’ engagement in “naked short-selling” and the associated legal and ethical consequences. This research focuses on the concept of “naked short-selling,” the statutes governing trading in “hard to borrow” securities, AMEX and SEC disciplinary orders associated with Goldman’s activities, and the legal documents used in v. Morgan Stanley. It demonstrates Goldman’s repeated engagements in illegal trading practices – practices that were widely acknowledged within the firm despite their clear violation of existing securities law and the firm’s ethical commitments.