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Tag Archives: executive compensation

Why is Goldman-Sachs so powerful and (arguably) innovative? Perhaps because even the 375 top partner/employees are constantly under threat of being “de-partnered”

[catagories: Washington Bankrutpcy attorney]

NY Times reporter Susanne Craig offers us a rare glimpse into perhaps America’s most powerful institution, the investment-banking firm of Goldman Sachs. Former U.S. Treasury secretaries Henry M. Paulson, Jr. and Robert E. Rubin both were one-time partners at Goldman-Sachs, as is New Jersey former governor Jon S. Corzine.

Ms. Craig’s Monday, September 13, 2010 article offers interesting reading about the unique structure of America’s most influentially powerful financial firm.

Goldman has approximately 35,000 employees, and 375 of these are "partners". Goldman-Sachs is a publically traded company (e.g. you can buy shares in Goldman-Sachs) and was one of the last large financial firms to "go public".

It is difficult to be named a partner, but an underperforming partner or a partner who is working in an area perhaps no longer as relevant to the future of the firm can be "de-partnered" to make way for fresh partners. Prior to becoming a publically traded company in 1999, once named a partner you were generally a partner for life, even if you grew to become underproductive dead wood for the company. Partners receive special bonusing and compensation in excess of a $200,000 base salary.

"The (partnering/de-partnering) process is at the heart of Goldman’s culture, a way for the firm to reward and retain top tallent. Goldman was one of the last of the big Wall Street partnerships to go public, selling shares in 1999. When it was private the partners were the owners, sharing in the profits, and in some cases having to put in money to shore up losses. To retain that team spirit as a public company, Goldman continued to name partners. In 1999, there were 221 (partners). Yet there are differences from past practices. When Goldmanwas a private partnership, it was rare that a partner would be asked to leave." reports Ms. Craig. "Goldman weeds out partners because it is worried that if the partnership becomes too big, it will lose its cachet and become less of a motivatinal tool for talented up-and-comers people involved in the process say. If too many people stay, it creates a logjam. The average tenure of a partner is about eight years, in part because of natural attrition and retirements. Goldman insiders also note they have what they call an "up-and-out" culture, leading to the active management of the pool. … Goldman typically removes about 30 partners every two years."

IDEAS FOR ACTION: Goldman-Sachs partners get in and stay in (arguably) by being the best at what they do. Even those partners who resign and move on to other firms often find even greater riches and security. I suggest that we can learn something from these elite partners at Goldman-Sachs, and that is to ask ourselves: "What have we done today, this week, this month, this year to make ourselves more ‘in demand’ in the working world?

Have we learned a few words in Spanish , Russian, Ukranian, Vietnamese or Korean to make cross-cultural customers feel more at home? Have we practiced some Yoga to increase our strength/flexibility and concentration? Have we tried to cut down or quite smoking so as to prolong our working life? Have we worked earnestly and cheerily so as to justify the request for a raise/promotion? Have we tried to become more comfortable with a new computer program or learn new features about one we already use? Did we point out a way our company/office can save money and increase productivity?

This type of behavior is perhaps how the elites at Goldman-Sachs seek to prevent becoming "de-partnered". Perhaps there is a lesson for us from the elites. My goal for you is that in any cycle of future layoffs, that you NOT be one of those who receives the layoff notice.

See Ms. Craig’s interesting article at the following link: