Insight: The “NEW” Goldman Sachs?

Rebranding Goldmans Sachs. The banking industry has gone through a huge crisis of culture over the past few years. While the financial impact of the banking crisis has been reduced, with banks making solid profits over the past few years, people’s perception of the industry is still badly damaged. Too many people view investment bankers as greedy, market manipulators who are only looking to make as much money as possible for their company, and in the process for themselves. In a bid to overcome these issues, major banks such as Goldman Sachs are looking to re brand their company culture.

Time for Change. Goldman Sachs is a name that is synonymous with investment banking. It is the premier institution in the world, and a company that any investment banker would think to work for at some point in their career. However, the company has had an image problem over the past few years. Plenty of news has filtered through in the past few years about a negative, profit driven culture within Goldman Sachs. Part of this image problem came from the change that occur in the last bull market: Goldman Sachs was sometimes perceived as an hedge fund competing with its own clients through a very profitable trading division. As a result, their big bosses are looking to change things around.

Short Term Profit. Goldman Sachs wants to develop a culture where their clients come first. They want to ensure that having a great customer service record is given higher priority than making short term profits. Similarly, they want their finance employees to reevaluate their professional goals and aspirations. A recent survey of the company showed that their junior banking staff still puts a priority over selling maximum volumes as opposed to making risk return calculations. These bankers are more worried about getting an extra 5,000 or 10,000 more in their yearly bonus, instead of positioning themselves with the long term solidity of the firm. One can argue, Goldman Sachs employee did not always came first: there is a fair chance as an employee you are more working for your partner (or at the very least your managing director) division bonus. On top of that, you are at risk of being lay off in a downturn. The short term commitment is then no longer a surprise.

Wake up Call. In 2010 the Securities and Exchange Commission of the United States ordered Goldman Sachs to answer questions about misleading investors. The allegations were in relation to sub prime mortgages, and it was a practice that was common among all major financial institutions at the time. However, the managing director of Goldman Sachs, E. Gerald Corrigan, says that the situation caused a great deal of damage to the company’s good name. This allegation and subsequent punishments led to the company undertaking a thorough review of all their business practices, in an attempt to make a change to the path that had been taken over the past decade.

Over 200 Goldman employees were surveyed, where they talked about their personal goals, professional goals, and the direction they believed the company was heading. This survey helped to show the type of mentality that an average Goldman employee had. Many blame the company’s recent directional problems on their stock exchange listing in 1999. In addition, the decision in the 1990s to grow in size in order to get a one up on JP Morgan is also seen as a negative turning point. These two moves saw the company develop a culture where they were only thinking of short term profits, and not what the long term repercussions of their decisions may be.

Sincere Effort. While Goldman has not managed to make a complete change in their business practices, there is a clear incentive within the company to do so. Undergoing a culture change is not easy, and it could take as long as another decade until we see the outcome of these moves from Goldman. However, the current message coming out of the company is a positive one. The company spent a lot of time on this review, according to Mr. Corrigan. He claimed that the company’s 400 partners dedicated a third of their working time to this survey for a three year period. They are determined to get things right. Let see how it goes.

Goldman Sachs

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One response to “Insight: The “NEW” Goldman Sachs?

  1. Pingback: Junior Trader to Lead Barclays | Alpha Banker·

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