The cull that usually accompanies Goldman Sachs’ biennial selection of new partners promises to be more brutal than usual this year as lower-than-expected turnover of top employees could prompt the bank to oust dozens of its 400 existing partners.
The selection process provides Goldman the opportunity to change the mix of top executives at a time when its business model has been called into question by regulatory problems, a backlash against its trading activities and plans to introduce new financial regulations.
The choice of partners is closely watched both inside and outside Goldman because those joining the highest rank in the bank’s hierarchy command high pay packages and significant influence within the bank. This year the market will be watching to see whether Lloyd Blankfein, chief executive and a former trader, promotes more investment bankers in an effort to shift Goldman away from the trading businesses that caused its recent woes.
Goldman declined to comment on the selection process, which is usually accompanied by a number of partners being “departnered”. People close to the situation stressed no decisions on the numbers and identities of new partners will be made until much later this year.
However, Goldman insiders said that so far partner turnover had been running below the 15-20 per cent seen in a typical two-year period and some executives are known to be concerned.
Executives suggest that a combination of Goldman’s rapid rebound from the credit crisis and the struggles of many of its rivals is prompting few partners to leave.
The recent fraud charges by the Securities & Exchange Commission against the bank, which it denies, might have compounded the effect. Insiders said employees rallied round the company as it came under siege from regulators and politicians.
However, the low turnover means that Goldman might have to cull more old partners than at other times if its executives want to maintain the tradition of anointing 100 or so new partners while keeping the total numbers of partners at about 400. The bank appointed 94 new partners in 2008.
Goldman executives argue that having a relatively small number of partners among its 33,000-plus employees has been important to maintaining its tightly-knit culture.