Goldman's Blankfein Is Model Leader: Opinion

October's third-quarter earnings statements underscored a formidable leadership problem for financial institutions. In today's world, success no less than failure can lead to crisis for businesses vilified as profiteers amid misery.

How can leaders lead when the better they do, the more fire they face?

If answers lie anywhere, they lie with Goldman Sachs' (GS Quote) Chairman and CEO Lloyd Blankfein.

2009 has been an extraordinary year in the great institution's history. Third quarter net income tripled while the second quarter saw the largest profit since Goldman Sachs went public. Commentator after commentator echoed analyst Michael Hecht, JMP Securities LLC in New York: Goldman Sachs' "biggest challenge and the thing that seems to get the most press is how much they put aside for comp expense."

It was in this difficult context that Blankfein worked his magic. Mid-second quarter, well before the announcement of unprecedented profit, Goldman Sachs published new compensation principles that, importantly, included higher bonus percentages deferred in stock payouts over a period of years.

Blankfein had said in April that his industry's compensation decisions looked "greedy and self-serving in hindsight." But he was already practicing foresight when, even as the November 2008 hurricane raged, Goldman announced that top executives would receive no bonus for 2008. That decision set a new tone. UBS(UBS Quote), for one, immediately announced that its own top executives would likewise get no bonuses.

It's an old game called "Follow the Leader."

Blankfein's leadership lies in melding actions and words. When, for example, he called public anger over skyrocketing executive compensation not just "understandable" but even "appropriate," it was no hollow sop to political expediency. After all, Blankfein himself had already moved to reform compensation well ahead of any furor over posted earnings.