Thursday, February 21, 2008

Goldman Sachs Profile
Goldman Sachs Annual Report

CEO: Lloyd C. Blankfein (2006 - present)
Notable Prior CEOs: Henry Paulson ( - 2006) current US Treasury Secretary

Stock Symbol: GS (NYSE)

Recent Close: Yahoo! Finance: GS

Business Principles: Goldman Sachs Business Principles [14]
  1. Our clients' interests always come first. Our experience shows that if we serve our clients well, our own success will follow.
  2. Our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore. We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard.
  3. Our goal is to provide superior returns to our shareholders. Profitability is critical to achieving superior returns, building our capital and attracting and keeping our best people. Significant employee stock ownership aligns the interests of our employees and our shareholders.
  4. We take great pride in the professional quality of our work. We have an uncompromising determination to achieve excellence in everything we undertake. Though we may be involved in a wide variety and heavy volume of activity, we would, if it came to a choice, rather be best than biggest.
  5. We stress creativity and imagination in everything we do. While recognizing that the old way may still be the best way, we constantly strive to find a better solution to a client's problems. We pride ourselves on having pioneered many of the practices and techniques that have become standard in the industry.
  6. We make an unusual effort to identify and recruit the very best person for every job. Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best firm.
  7. We offer our people the opportunity to move ahead more rapidly than is possible at most other firms. Advancement depends on merit, and we have yet to find the limits to the responsibility our best people are able to assume. For us to be successful, our men and women must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.
  8. We stress teamwork in everything we do. While individual creativity is always encouraged, we have found that team effort often produces the best results. We have no room for those who put their personal interests ahead of the interests of the firm and its clients.
  9. The dedication of our people to the firm and the intense effort they give their jobs are greater than one finds in most other organizations. We think that this is an important part of our success.
  10. We consider our size an asset that we try hard to preserve. We want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.
  11. We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs. We know that the world of finance will not stand still and that complacency can lead to extinction.
  12. We regularly receive confidential information as part of our normal client relationships. To breach a confidence or to use confidential information improperly or carelessly would be unthinkable.
  13. Our business is highly competitive, and we aggressively seek to expand our client relationships. However, we must always be fair competitors and must never denigrate other firms.
  14. Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.

Why Our Bank?
    Goldman Sachs is where potential is realized. And careers are made.

    People create success, which is why we go to great lengths to attract, inspire and reward creativity and talent. As a global business, our people come from all over the world and represent different nationalities, educational backgrounds and life experiences. We welcome their unique perspectives, their energy and ideas and their willingness to learn as well as to teach. A commitment to integrity, team work and the pursuit of excellence is at the core of everything we do. As with so many who have come before us, we believe you will find at Goldman Sachs some of the richest opportunities and most interesting challenges of your life.

    Clients First
    Our success depends on one thing: our clients’ success.

    Our primary responsibility is clear – to succeed on our clients’ behalf. We constantly strive to anticipate our clients’ rapidly changing needs and to develop new services to meet them. We stress creativity and imagination in everything we do, and always look for a better solution to a client’s problem. We pride ourselves on having pioneered many of the practices and techniques that have become industry standards. While we understand that our clients come to us to get things done, and stay with us because we do, we know that financial returns are not enough. We must demonstrate integrity and honesty. We must win our clients’ trust, and we go about the business of doing that every day.

    You are the future of Goldman Sachs.

    It bears repeating: Our people are our most valuable asset. We offer our professionals the opportunity to work with some of the world’s most interesting challenges and influential leaders, while our team-driven culture leverages and rewards individual talent. Ongoing training and mentoring programs help shape exciting and personally satisfying careers. And our diverse and inclusive workforce provides access to other smart, interesting, achievement-oriented people on the road to becoming the next generation of leaders. We believe that Goldman Sachs offers the possibility to move ahead more rapidly than is possible at most other firms. And we have yet to find the limits of the responsibility our best people can handle.

    Here, leadership is a mindset – not a title.

    At Goldman Sachs, we bring together people, ideas and capital to bring about progress. We expect everyone at the firm to be a contributor. No one can survive at Goldman Sachs as just an employee. This is why we make an unusual effort to identify and recruit people who, in addition to their intellect, share our commitment to leadership in business and to the communities where we work and live. A degree in business or finance is not necessary – initiative is. Seeking out great opportunity and responsibility is. Our distinct corporate culture is one of the things that set us apart from other firms. At Goldman Sachs, everyone has a place at the table.

    At Goldman Sachs, success without integrity is failure.

    Goldman Sachs’ culture reflects more than a structure. It is a statement of values. Our commitment to integrity, teamwork, excellence, meritocracy and innovation enables us to build our relationships, with clients and with colleagues, on honesty and trust. It drives our ability to deliver extraordinary client service and to generate superior long-term financial performance for our shareholders. Our values inspire us to give back to the community through volunteerism, philanthropy, scholarships and outreach. Each of us in the firm takes pride in our role as a steward of the Goldman Sachs legacy. We understand that our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore.

    Business Principles
    Everything that you've read in this section is based on the 14 business principles that guide how we do business and conduct ourselves on a daily basis.

    Refer to the 14 Business Principles listed above.

    Goldman Sachs Story: Slide Show (click on Culture tab)

    • Suzanne Nora Johnson: "Everyone here is committed to a level of excellence and going the extra mile in a way that I've never seen at any other organization."
    • Alexander Dibelius: "Everybody that I've met during my career at Goldman Sachs could teach something to me. And I had the feeling that I could as well in some areas teach something to them. And this kind of mutual respect for the experience of different people and the willingness to learn - but as well a willingness to teach - is something very unique to Goldman Sachs."
    • Peter Weinberg: "We compete based on the quality of our product and the quality of our relationships. And you can't have a strong client relationship and a strong product offering without being creative, because the markets now are so complex, there are so many different things to do, that without creativity... It's just a weapon that you can't live without."
    • John Rodgers: "People at Goldman Sachs view their jobs very much as blue sky, that there's always the possibility that they can expand them to any degree they want. The satisfaction that comes from extraordinary performance at Goldman Sachs is something quite extraordinary to witness. And I think that is one of the most motivating factors and drivers of this culture."
    • Lloyd Blankfein: "One of the attractive elements of this business is that in some cases you're running a number of sprints in a day and not just one long marathon. You get a lot of opportunities to play the game, and because you get a lot of opportunities you don't win them all, you just win more than anybody else. That's what you strive to do."

Notable Deals:
  • Goldman Sachs is currently representing Yahoo! during Microsoft's bid for the company. This deal has yet to happen so stay on the look out.
  • Upcoming IPOs as Lead Manager: Artio Global Investors; American Water Works; CCS Medical Holdings; Convio; Education Management Corporation; GlassHouse Technologies; INFONXX; Initiate Systems; MagnaChip Semiconductor; Prometheus Laboratoris
    (this information was found at IPO Scoop - refer to the Banking Resource section for the link)

    Goldman Sachs Story: Slide Show

    Key Points

    • 1870s Pioneered commercial paper for U.S. entrepreneurs
    • 1900s Lead role in establishing IPO market
    • 1900s Popularized use of P/E ratios, audited financials, and industrial stocks
    • 1920s One of the first to hire MBAs on Wall Street
    • 1930s Took lead in banking reform and corporate governance issues
    • 1940s Early originator of risk arbitrage
    • 1950s Leader in creating block trading
    • 1950s First to focus on institutional sales market
    • 1950s Established investment banking marketing group
    • 1960s First dedicated M&A group on Wall Street
    • 1970s First negotiated trade on NYSE
    • 1970s Created defense strategy for hostile takeovers
    • 1980s Leader in global privatization
    • 1980s One of the first registered higy-yield bonds for LBOs
    • 1980s Created first public offering of original issue deep discount bond
    • 1980s First electronic distribution of research
    • 1990s Introduced paperless trading on NYSE
    • 1990s Published Black-Litterman Asset Allocation Model
    • 1990s Lead manager of first-ever global debt offering by U.S. corporation
    • 1990s Launched GSCI, Goldman Sachs Commodity Index
    • 2000s First electronic offering for World Bank
    • 2000s Advised landmark debt offering for government of China
    • 2000s Financial advisor for largest-ever merger between biotech firms

    Business at Goldman Sachs is divided into three departments:
    • Asset Management and Securities
    • Investment Banking
    • Trading and Principal Investments

    Goldman Sachs was founded in 1869 by German Jewish immigrant Marcus Goldman.[2] The company made a name for itself pioneering the use of commercial paper for entrepreneurs and was invited to join the New York Stock Exchange in 1896. It was during this time that Goldman's son-in-law Samuel Sachs joined the firm which prompted the name change to Goldman Sachs.

    In the early 20th Century, Goldman was a major player in establishing the Initial Public Offering market. It managed one of the largest IPO's to date, that of Sears, Roebuck and Company in 1906. It also became one of the first companies to heavily recruit those with MBA degrees from leading Business Schools, a practice that still continues today.

    In 1929, it launched the Goldman Sachs Trading Corp., a closed-end mutual fund with characteristics similar to that of a Ponzi Scheme. The fund failed as a result of the Stock Market Crash of 1929, hurting the firm's reputation for several years afterward.[3]

    In 1930, Sidney Weinberg assumed the role of Senior Partner and shifted Goldman's focus away from Trading and towards Investment Banking. It was Weinberg's actions that helped to restore some of Goldman's tarnished reputation. On the back of Weinberg, Goldman was lead advisor on the Ford Motor Company's IPO in 1956, which at the time was a major coup on Wall Street. Under Weinberg's reign the Firm also started an Investment Research division and a Municipal Bond department. It also was at this time that the firm became an early innovator in Risk Arbitrage.

    Gus Levy joined the firm in the 1950s as a well known securities trader, which started a trend at Goldman where there would be two powers generally vie for supremacy, one from investment banking and one from securities trading. For most of the 1950s and 1960's, this would be Weinberg and Levy. Levy was a pioneer in block trading and the firm established this trend under his guidance. Due to Weinberg's heavy influence at the firm, it formed an Investment Banking Division in 1956 in an attempt to spread around influence and not focus it all on Weinberg.

    In 1969, Levy took over as Senior Partner from Weinberg, and built Goldman's trading franchise once again. It is Levy who is credited with Goldman's famous philosophy of being "long term greedy," which implies that as long as money is made over the long term, trading losses in the short term are not to be worried about. That same year, Weinberg retired from the firm.

    Another financial crisis for the firm occurred in 1970, when the Penn Central Railroad Company went bankrupt with over $80 million in commercial paper outstanding, most of it issued by Goldman Sachs. The bankruptcy was large, and the resulting lawsuits threatened the partnership capital and life of the firm. It was this bankruptcy that resulted in credit ratings being created for every issuer of commercial paper today by several credit rating services.[4]

    During the 1970s, the firm also expanded in several ways. Under the direction of Senior Partner Stanley R. Miller, it opened its first international office in London in 1970, and created a Private Wealth division along with a Fixed Income division in 1972. It also pioneered the "White Knight" strategy in 1974 during its attempts to defend Electric Storage Battery against a hostile takeover bid from International Nickel and Goldman's rival Morgan Stanley.[5] This action would boost the firm's reputation as an investment advisor because it pledged to no longer participate in hostile takeovers.

    John Weinberg (the son of Sidney Weinberg), and John C. Whitehead assumed roles of Co-Senior Partners in 1976, once again emphasizing the co-leadership at the firm. One of their most famous initiatives was the establishment of the 14 Business Principles[6] that are still used to this day.

    In the 1980s, the firm made a major move by acquiring J. Aron & Company, a commodities trading firm which merged with the Fixed Income division to become known as Fixed Income, Currencies, and Commodities. J. Aron was a major player in the coffee and gold markets, and the current CEO of Goldman, Lloyd Blankfein, joined the firm as a result of this merger. In 1985 it underwrote the public offering of the Real Estate Investment Trust that owned Rockefeller Center, then the largest REIT offering in history. In accordance with the beginning of the collapse of the Soviet Union, the firm also became largely involved in facilitating the global privatization movement by advising companies that were spinning off from their parent governments.

    In 1986, the firm formed Goldman Sachs Asset Management, which manages the majority of its mutual funds and hedge funds today. In the same year, the firm also underwrote the IPO of Microsoft, advised General Electric on its acquisition of RCA and joined the London and Tokyo stock exchanges. 1986 also was the year when Goldman became the first United States bank to rank in the top 10 of Mergers and Acquisitions in the United Kingdom. During the 1980s the firm became the first bank to distribute its investment research electronically and created the first public offering of original issue deep-discount bond.

    Robert Rubin and Stephen Friedman assumed the Co-Senior Partnership in 1990 and pledged to focus on globalization of the firm and strengthening the Merger & Acquisition and Trading business lines. During their reign, the firm introduced paperless trading to the New York Stock exchange and lead-managed the first-ever global debt offering by a U.S. corporation. It also launched the Goldman Sachs Commodity Index (GSCI) and opened a Beijing office in 1994. It was this same year that Jon Corzine assumed leadership of the firm following the departure of Rubin and Friedman. The firm joined David Rockefeller and partners in a 50-50 join ownership of Rockefeller Center during 1994, but later sold the shares to Tishman Speyer in 2000. In 1996, Goldman was lead underwriter of the Yahoo! IPO and in 1998 it was global coordinator of the NTT DoCoMo IPO. In 1999, Henry Paulson took over as Senior Partner.

    One of the largest events in the firm's history was its own IPO in 1999. The decision to go public was a tough one that the partners debated for decades. In the end, Goldman decided to offer only a small portion of the company to the public, with some 48% still held by the partnership pool.[7] 22% of the company is held by non-partner employees, and 18% is held by retired Goldman partners and two longtime investors, Sumitomo Bank Ltd. and Hawaii's Kamehameha Activities Assn (the investing arm of Kamehameha Schools). This leaves approximately 12% of the company as being held by the public. Henry Paulson became Chairman and Chief Executive Officer of the firm. Hull Trading Company, one of the world’s premier market-making firms, was acquired by Goldman in 1999 for $531 million.

    More recently, the firm has been busy both in Investment Banking and in Trading activities. It purchased Spear, Leeds, & Kellogg, one of the largest specialist firms on the New York Stock Exchange, for $6.3 billion in September 2000. It also advised on a landmark debt offering for the Government of China and the first electronic offering for the World Bank. It merged with JBWere, the Australian investment bank and opened a full-service broker-dealer in Brazil. It expanded its investments in companies to include Burger King, McJunkin Corporation, and in January 2007, Alliance Atlantis alongside CanWest Global Communications to own sole broadcast rights to the CSI franchise. In May 2006, Henry Paulson left the firm to serve as U.S. Treasury Secretary, and Lloyd Blankfein was promoted to Chairman and Chief Executive Officer.