by Jim Owen, Founder and Chief Inspiration Officer, Center for Cowboy Ethics and Leadership

As someone whose first career was in the investment industry, I was fascinated to read the Wall Street Journal’s recent review of a new book called “What Happened to Goldman Sachs.”  Written by someone who, like the book’s author, had formerly worked at the firm, the review underscores the perils of corporate leaders who forget—or never bothered to define—what their companies stand for.

In an industry populated by smart, successful people, Goldman was for decades at the top of the heap in terms of reputation and cachet, not to mention profitability.  The key to its success was its culture.  Goldman was known for recruiting the smartest, most driven people on Wall Street, and demanding that they operate with an almost superhuman work ethic.

The firm excelled at finding ways to profit. But it kept greed under control by placing one business principle above all: “our clients’ interests always come first.”   Partners made sure this principle was heeded, knowing that any hint of a conflict of interest or unethical behavior would put the firm’s sterling reputation and its fortunes at risk.

The book chronicles how Goldman’s culture eroded and morphed over time, causing many of its most talented people to leave the firm. It’s a classic tale of “the slippery slope.”   Regulatory changes reshaped the competitive landscape, leading Goldman to dump its circa-1869 private partnership structure and go public. Suddenly, the firm’s long-held business principles had to compete with the goal of delivering high returns to shareholders. At the same time, as federal regulators issued a flurry of new rules, “Goldman’s standards drifted away from its business principles and toward the management of legal liability,” as the book reviewer puts it.

I’m sure many of Goldman’s former partners were saddened by allegations that Goldman used clients’ information to trade against them, as came to light in 2010 and 2011, and by the subsequent Justice Department and SEC criminal investigations of the firm.  Among other things, Goldman was accused of knowingly peddling “junk” securities to investors, a breach of trust that showed its vaunted “clients-first” policy had become a sham.

Goldman has survived and, after a spate of financial troubles, continues to prosper.  But the tarnish to its reputation is irreversible, and it will never again be held in the esteem it once enjoyed.  Goldman is an object lesson for any business leader who doubts the importance of having “a code to live by.”