Goldman Sachs

Categories: Companies traded on the New York Stock Exchange | Banks of the United States | Companies based in New York City | Investment banks | Fortune 500 companies

The Goldman Sachs Group Inc.
Image:LogoGS.gif
Type Public
Founded 1869
Location New York, New York
Key people Hank Paulson, Chairman & CEO
Lloyd Blankfein, President & COO
Robert S. Kaplan, Vice Chairman
Suzanne M. Nora Johnson, Vice Chairman
David A. Viniar, CFO
Edward C. Forst, CAO
Gregory K. Palm, General Counsel
Esta E. Stecher, General Counsel
Kevin W. Kennedy, Head of Human Capital Management
Alan M. Cohen, Global Head of Compliance
Abby Joseph Cohen Managing Director
Industry Finance and Insurance
Products Investment Banking
Revenue $29,839,000,000 USD (11/04)
Employees 20,722
Website www.gs.com

The Goldman Sachs Group, Inc. NYSE: GS (referred to as GS, or just Goldman) is an investment bank. The firm was founded in 1869. Headquartered in downtown New York City at 85 Broad Street ([1]), Goldman operates globally with offices in leading financial centers, e.g. New York City, Chicago, Frankfurt, London, Hong Kong and Tokyo.

Goldman is mostly involved in wholesale financial services, although it has a newer and growing Private Client Services arm. Its largest area of activity is proprietary trading, that is, executing trades for its own profit with its own money. In fact, investment banking accounts for only 5 percent of Goldman's profits.

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Quick facts

  • Employed 20,722 people at the end of November 2004.
  • Total Net revenues for FY 2004 were $20.550 billion
  • Pre-tax earnings for the 2004 fiscal year ending November 30, 2004 were $6.676 billion.
  • The CEO is Hank Paulson.
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Lines of Business

Goldman Sachs is divided into three main business segments: Investment Banking, Trading and Principal Investments; and Asset Management and Securities Services.

Investment Banking is divided into two segments and includes Financial Advisory (mergers and acquisitions, investitures, corporate defense activities, restructurings and spin-offs) and Underwriting (public offerings and private placements of equity, equity-related and debt instruments). Goldman Sachs is one of the leading investment banks, topping the league tables many times, especially in equity operations. In mergers and acquisitions, it gained fame historically by advising clients on how to avoid a hostile takeover. Goldman Sachs, for a long time during the 1980s, was the only major investment bank with a strict policy against helping to initiate a hostile takeover, which increased the firm's reputation immensely. This segment accounts for around 15 percent of Goldman Sach's revenues.

Trading and Principal Investments is the largest segment and profit center for Goldman. This segment consists of the revenues and profit gained from the Bank's trading activities, both on behalf of its clients and for its own account (called proprietary trading). The segment includes Fixed Income, Currency and Commodities (trading in interest rate and credit products, mortgage-backed securities and loans, currencies and commodities, structured and derivative products), Equities (trading in equities, equity-related products, equity derivatives and structured products and executing client trades in equities, options, and futures on world markets), and Principal Investments (merchant banking investments and funds). Most trading done by Goldman is not a "bet" of a particular outcome in the market, but rather an attempt to sell something for an incrementally greater amount of money it bought in the process of acting as a market maker. Around 65 percent of Goldman's revenues and profits are from this area. Upon its IPO, Goldman predicted that this segment would not grow as fast as its Investment Banking division and would be responsible for a shrinking proportion of earnings. The opposite has been true, however, and resulted in Lloyd Blankfein's appointment to President and Chief Operating Officer after John Thain's departure to run the NYSE.

Asset Management and Securities Services is a rapidly growing business for Goldman as it gains more and more market share. The Asset Management segment provides investment advisory and financial planning services to large institutions and very wealthy individuals. These services also include the management of Mutual Funds, Hedge Funds, Fund of Funds, Real Estate Funds, and Private Equity Funds. This segment accounts for around 19 percent of Goldman's earnings. The Securities Services segment provides Prime Brokerage, financing services, and securities lending to mutual funds, hedge funds, pension funds, foundations, and high networth individuals.

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History

Goldman Sachs was founded by Marcus Goldman as a business which assisted other businesses in borrowing money via commercial paper (very short term loans). It grew organically from this base, but suffered a major setback when it set up what would be called today a giant hedge fund (Goldman Sachs Trading Co.) in 1929 which crashed in the resulting great depression. This damaged its reputation for a long time.

Sydney Weinberg became the head of Goldman Sachs. He was a relentless salesman, trying to befriend as many leaders of top businesses and governments as possible. His close friendship with the Ford family allowed Goldman Sachs to arrange for the Ford IPO, the largest in the world at that time. This was a major coup for the company which enhanced its reputation greatly. Others at Goldman realized that essentially all new business was brought in from Weinberg, and so instituted an outbound sales force to attempt to become less reliant on Weinberg. This had never been done before in investment banking.

Gustave Levy took over after Weinberg. He came from the firms trading department, and got Goldman Sachs into the business of trading for its own profit (its major source of profit today). John Whitehead and Weinberg's son next took over. They commited Goldman Sachs to expand internationally.

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Alumni of Goldman Sachs

Many former partners of Goldman Sachs have gone on to hold prominent public positions including Robert Rubin the United States Secretary of the Treasury under Bill Clinton, Jon Corzine currently a United States Senator from New Jersey, and John Thain currently the CEO of the New York Stock Exchange. Also, Stephen Friedman was Chairman of George W. Bush's National Economic Council, incidentally the position Rubin held before moving to Treasury. John Thornton was previously expected to succeed Hank Paulson as President of the firm, but resigned to take up a senior position at a business school in China.

Another former partner, Jack Ryan (Senate candidate), withdrew from his bid for the open United States Senate seat in Illinois after embarrassing allegations about his sexual past.

Apart from political careers, alumni of Goldman Sachs seek entrepreneurship and excel there:

  • Pete Briger, a former partner who co-founded multi-billion dollar hedge fund Fortress.
  • Ed Mule, a former partner and founder of multi-billion dollar hedge fund Silverpoint.
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Diversity

Goldman Sachs received a 100% rating on the Corporate Equality Index released by the Human Rights Campaign starting in 2004, the third year of the report. In addition, the company was named one of the 100 Best Companies for Working Mothers in 2004 by Working Mothers magazine.

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References

Goldman Sachs: The Culture of Success. Lisa Endlich. Little, Brown and Company. 1999. ISBN 0316643734

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See also

Financial regulation, Misleading financial analysis, Corporate crime, financial bubble

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External links

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Data

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Litigation

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Articles

ja:ゴールドマン・サックス