CEO Lloyd Blankfein's infamous comment to the Times of London that Goldman Sachs is doing "God's work" clearly was tone deaf. Having said that, he should get at least partial credit for knowing that it makes sense to try to show that the firm creates value in society.

I heard a distinguished public relations counselor on CNBC today giving Goldman free advice to “tell all the good things it's doing." Judging by the advance copy of his testimony before the U.S. Senate Permanent Subcommittee on Investigations today, Mr. Blankfein intends to heed this advice and repeat the effort he made with the Times, absent, of course, the reference to God.

“We help governments raise capital to fund schools and roads," Mr. Blankfein will testify.
"We advise companies and provide them funds to invest in their growth. We work with pension funds, labor unions and university endowments to help build and secure their assets for generations to come. And, we connect buyers and sellers in the securities markets, contributing to the liquidity and vitality of our financial system."

All well and good. The mistake, however, was not only misplacing himself and his firm at the right hand of the Creator of the Universe. He also failed, both with the Times and in his prepared testimony, to show how Goldman creates value. The business model does matter. Here's why:

As explained in the Page Society's Special Report: The Dynamics of Public Trust in Business, the most important core dynamic of trust is mutuality – the sense that one's interests are aligned with the other party. If the public believes that its interests will be served as a firm pursues its business objectives, it's more than happy to see the firm prosper (within reasonable proportions) in return for creating value.

On the other hand, if the public believes that a firm's business model calls for it to benefit by taking advantage of the public, even if some public good is a byproduct, it will not bestow its trust on the firm. In that case, one should not be surprised to find oneself on the hot seat before a congressional committee, as Mr. Blankfein does today.

Having spent considerable time in the health insurance industry, I have first-hand knowledge of this phenomenon. Especially during the heyday of claim-denying HMOs, the industry seemed to convey that its business model consisted of charging as much as possible for coverage, while paying out as little as possible in claims. Even though health insurance clearly provided some public value, that was a formula for a lack of trust. And for congressional hot seats. Health industry executives had their fair share of those.

As the health insurance industry tried to remake its business model in the post-managed care era, the focus shifted to working cooperatively with physicians and patients to achieve the mutual goal of providing as much of the right care as possible as early as possible in order to keep people healthy and keep costs down. One might question how successful the industry was in changing that public perception of its business model, especially given the rancorous public debate on health care that preceded the current rancorous public debate on financial reform. But there would have been a much quicker march to a single-payer system that would have wiped out the industry had most Americans not trusted their own relationship with their private health insurance provider.

I suspect that the political climate is not quite ready for a government takeover of the financial sector, either, but that's more a function of a lack of trust in government than a statement of trust in Goldman and its competitors.

Bottom line: It's not sufficient to show that your firm, or industry, creates value. It's also important to demonstrate that in doing so, your customers and the public don't always get the short end of the stick. In response to congressional questioning today, it will be interesting to see if Mr. Blankfein addresses the public's sense that Goldman's business model is “Heads I win, tails you lose."

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