Want to Improve Goldman Sachs Convert it Back into a Partnership - Forbes

Cynics on twitter are already su ggesting that smith

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Unformatted text preview: not enou gh, or he didn’t care. Cynics on Twitter are already su ggesting that Smith is attacking his former employer becau se he didn’t get promoted to managing director. The old Goldman, says Smith, “revolved arou nd teamwork, integrity, a spirit of hu mility, and always doing right by ou r clients.” The new Goldman, he says, is abou t doing “whatever will bring the biggest profit to Goldman,” even if that goes against the interests of its clients. I’m not in a position to say if this is really tru e. Bu t let’s assu me for the sake of argu ment that Smith’s criticisms are sincere and accu rate. Smith blames the cu rrent Goldman CEO, Lloyd Blankfein, and its president, Gary Cohn, for losing “hold of the firm’s cu ltu re on their watch.” Bu t the real cu lprits are Goldman’s 1990s partners, led by Hank Pau lson and Jon Corzine, who in 1999 converted the venerable bank from a 221-member partnership forbes.com/sites/aroy/2012/03/14/…/print/ 1 /3 into a pu blicly traded company. There is a hu ge difference between Goldman Sachs, the partnership, and Goldman Sachs, the pu blicly-traded entity. If you ’re a partner at an investment bank, you r incentives are long-term-oriented. You ’re going to be a partner for decades, and you know that you stand to be best rewarded by maintaining the loyalty of you r best clients. This incentive, in tu rn, leads you to want to take pride in you r work, as something that is abou t you r clients, rather than abou t short-term moneymaking. On the other hand, Goldman the pu blicl...
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This note was uploaded on 01/27/2014 for the course FINA 2010 taught by Professor Wangyan during the Winter '11 term at CUHK.

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