[ by Larry Goldfarb ]

At least according to Greg Smith.

In the book published today, "Why I Left Goldman Sachs," former Goldman Vice President Greg Smith notes that the root of Goldman's cultural issues stemmed from a 2005 decision to change how it calculates year-end bonuses. corrupting a culture of teamwork that existed previously.  Before 2005, the company determined workers’ annual awards "not just on how much business you’d brought in, but also on how good you were for the organization," Smith, a former vice president, writes in "Why I Left Goldman Sachs: A Wall Street Story."

"From 2005 until the present day, the system has become largely mathematical: you were paid a percentage of the amount of revenue next to your name," a figure that could vary from 5% to 7%, wrote Smith, 33, without saying how he learned about such a change. "The problem with the new system was that people would now do anything they could -- anything -- to pump up the number next to their name."

The account by Smith contrasts with the “Compensation Principles” that CEO Lloyd Blankfein read aloud at the May 2009 annual shareholders meeting.  According to those tenets, the company’s pay practices are meant to encourage teamwork and discourage excessive risk-taking.  "Compensation should reflect the performance of the firm as a whole," according to the principles.  "Assessment areas should include productivity, teamwork, citizenship, communication and compliance."  The policy also specifies that no one in a "risk-taking role" should have contracts or evaluations "based on the percentage of revenues generated by a specific individual."

Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment on the book.

For more information, please read [Bloomberg, 10/21/12].