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If Goldman Sachs (NYSE:GS) employees favor “ripping eyeballs out” of the clients derisively referred to as “muppets,” as a recent defector claims, is that proof that it’s headed for extinction, or was it merely a brief distraction meant to obscure Goldman’s handsome profits?

Has Google (NASDAQ:GOOG) also lost its way, as another ex-employee suggests, to fruitlessly chase Facebook’s social supremacy?

Corporate culture is a squishy concept: it’s not a number that can be used to calculate the net present value of future cash flows. But for successful companies, it offers some assurance that the success will survive the inevitable turnover in personnel. For failing ones, it’s often the first and most obvious target for change.

Goldman was already widely despised for its role in the financial crisis and the shady profiteering tactics publicized in its aftermath. Still, the firm that duped its clients into buying toxic mortgage investments it was betting against, and helped Greece cover up its debt mountain, lost $2.1 billion in market value the day Greg Smith’s poison-pen resignation letter ran in The New York Times.

Of course, Goldman had gained $4.4 billion in investors’ esteem the day before, as its stock rallied to a seven-month high after acing the Federal Reserve’s stress test. That will certainly take away some of the sting out of being called out by a high-minded middle manager.

Goldman tried to take out the rest with a promptly leaked internal memo from its two most senior executives about how it’s so clearly not the muppet-murderer it was made out to be by a potentially disgruntled not-really-insider.

This was probably not the place to rehash a detailed defense of the extremely damaging revelations dug up by the recent Senate probe about how far Goldman has gone to take advantage of its clients.

Still, the corporate response was revealing for its heavy reliance on employee surveys. As if the fact that 89% of Goldmanites think they deliver “exceptional” customer service meant anything.

Employees put out by the fact that their survey input hasn’t yet translated into public admiration were consoled: “It is unfortunate that all of you who worked so hard through a difficult environment over the last few years now have to respond to this.” Life can be so unfair sometimes.

The memo didn’t address the obvious conflict of interest inherent in trading with (meaning, in fact, against) one’s clients. But that really goes to the heart of Goldman’s trading culture—in an environment where its risk-taking is being curtailed, forcing a renewed focus on investment banking and other nonlethal pursuits where everyone expects to keep their eyeballs.

It’s entirely possible that trading on one’s own account is incompatible with “exceptional” customer service. It’s likely that being a publicly listed company is another handicap, insofar as employees accumulate wealth in stock that can be sold at any moment, rather than a partnership whose value depends on clients’ long-term loyalty.

What’s certain is that beyond the parochial world of finance, Goldman’s culture now repels many more people than it attracts. And that’s a long-term liability, no matter what employees say in surveys.

Source: Goldman's Corporate Culture Could Be A Liability