MO: "Goldman Sachs/Lehman Brothers" - (R. Freedman)

Goldman Sachs / Lehman Brothers

by Richard D. Freedman and Jill Vohr

New York University Stern School of Business Revised September 19991

The Modern Investment Banking Industry

The investment banking industry has changed dramatically over the past 20 years. The most apparent manifestation of this change has been a shift from relationship banking to transactional banking. Relationship banking exists when a company establishes a relationship with a bank that handles most of its business, generally over an extended period of time. Transactional banking exists when a company is involved with many investment banks that compete for its business on a deal-by-deal basis.

A deal is any exchange of assets, such as stocks, bonds, and parts or all of companies between investment banks that sell them for their owners and those who buy them. The environment of investment banking had become turbulent and the volume of activity has greatly increased. Deal making has replaced banking as the more profitable investment banking activity. Because the number and profitability of deals increased and buyers and sellers became less certain with respect to exchange rates, the trust between companies and banks, the foundation for relationship banking, became difficult to maintain. Corporations began to “shop” for the best deals. Thus began the era of transactional banking.

Banks became more competitive and expanded and innovated their products and services. The investment banking industry became more specialized and segmented. Bank partners feared a drop in the value of their own particular share and many resigned. Firms that were subsequently deficient in capital went public in order to broaden their financial bases. This increase in competition and activity caused an explosive growth in investment banking firms. Firms increased capital and human resources to support their growth. All these changes required new management techniques, especially in the area of deal making.

Deals and Deal Making

Deals are made quickly to minimize competition and to avoid complications from fluctuating exchange rates. Deals are also unique. Each requires information and assistance from numerous possible combinations of internal and external sources. When a deal is made, it requires participation, cooperation, and support internally across several product and service departments and externally from industry experts and companies that provide different related services. Firms do not operate independently; rather they depend on outside sources for information and services. The boundaries of firms have become much more porous, meaning that the flow of information in and out of the firm has increased. Internally, employees are uncertain as to

NEW YORK UNIVERSITY LEONARD N. STERN SCHOOL OF BUSINESS

Goldman Sachs/ Lehman Brothers

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whether their efforts towards a deal will secure that deal and whether they will be compensated for their work. Interdependence and a spirit of sharing and trust are crucial. These issues require new management techniques that encourage cooperative behavior and support an organizational structure that is flat and flexible rather than hierarchical and rigid.

The Management of Deal Making

The transition from relationship banking to transactional banking has required an accompanying transition in organizational structure and management. In their book, Doing Deals, Robert G. Eccles and Dwight B. Crane suggest how these structures and management systems should develop. They argue that because the heart of investment banking is the making of a deal, it follows that those at lower levels of the firm who are involved in deal making are best equipped to formulate the firm's operational strategy. This process of grassroots strategy formulation requires “a self designing organization in which organizational structure is determined by those who develop the business strategies within the broad parameters of organizational design established by top management.”2

Top management has the responsibility of overseeing the formulation process and making sure that employees do not pursue their individual interests at the expense of the firm's long-term interest. According to Eccles and Crane, this environment requires management to impose tight control systems, including reports on calling activity, evaluations from customers, internal cross-evaluations within and between departments, and measures of financial outcomes. A structure that is flexible enough to “roll with the deals” and a management system that supports this flexibility while keeping it in tight check will provide an environment well suited for the modern investment banking industry.

Lehman Brothers

Lehman Brothers, once the longest surviving continuing investment banking house, fell in April 1984 when it was sold to Shearson/American Express. Yet, only several months before, the company ranked as one of Wall Street’s largest investment banking houses, more profitable than it had been at any point in its long history. The firm had a capital base of close to $250 million and incomes for its partners of over $2 million. The sudden decline in profits that led to Lehman’s sale was unexpected.

The company had experienced a similar setback in 1969 when Robert (Bobby) Lehman died unexpectedly causing chaos in the leaderless Lehman Brothers.

His patrician calm, his absolute, unquestioned rule,...[and] his ability to spot promising enterprises early...gave security and structure to the fractious partnership. Bobby had a management style that seemed to work for Lehman: “For years, Bobby Lehman had enjoyed watching the competition among his partners almost as much as he enjoyed watching his stable of beloved horses race. Lehman Brothers had a long tradition of encouraging independence among its bankers, but as long as Bobby was alive, there was someone with the authority to police warring fractions.3


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Bobby Lehman’s death provoked partners to resign, depleting capital resources. The firm was losing money at an annual rate of $9 million as it struggled to find a new leader and regroup.

Lehman Brothers turned to one of its partners, Peter G. Peterson. Peterson came with a long history of success. He was president of Bell and Howell at the age of 34 and Secretary of Commerce under President Nixon. Felix Rohatyn, an investment banker who had worked with Peterson, said that the Lehman Board members “wanted Pete to help settle the place down and at the same time establish corporate relationships. He took over, and, in a short time, he did an absolutely brilliant job.”4 He reorganized the company, cutting down staffs to reduce costs and bringing in new business to expand capital resources. Over his 10 years as Chief Executive Officer, he managed to engineer successful mergers, first with Abraham and Company and then with Kuhn Loeb.

Peterson was an attractive man with a trim figure, a deep voice, and a deliberate manner, all of which conveyed authority. He possessed an “ambassadorial” management style and his “dazzling” approach was marked by considerable intelligence and aggressive preparation. He was the archetypal Washington insider, referring to Kissinger as “Henry” and Buchwald as “Art.” His strengths came from his numerous contacts with clients, competitors, governments, the press, and public. Peterson was considered “Mr. Outside,” spending much of his time representing Lehman to external constituencies. However, he was not considered as successful an inside man. He gave little attention to his partners and even less to other employees and did not play an active role in the management of the business. His associates felt that he was insensitive to people. Partner Stephen W. Bershad described what he thought of Peterson’s management style:

He would set his mind on something and see nothing else. He would walk down the hall with a stack of letters, read the mail, write replies and just throw them over his shoulder, assuming someone would be there to pick them up. He would call partners at all hours, summon them to ride uptown in his chauffeured Oldsmobile and then ignore them as he talked on the telephone or scanned a memorandum. Many partners thought him self-centered, haughty, unfeeling, uncaring.

Eric Gleacher, another partner, felt that a major shortcoming of Peterson’s was his “failure to create a sense of teamwork across the firm--it was absent when he arrived, as well as when he departed. Lehman was held together strictly by money, blood money.5

Unfortunately, Peterson was unaware that many of his partners respected him but did not like him. One such partner was Lewis Glucksman. Lewis Glucksman was considered “Mr. Inside.” He managed the day-to-day business of the firm. All of the departments reported to him, and his knowledge of Lehman Brothers was vast. Glucksman was a trader, unlike Peterson who was a banker, and had a very different management style:

He arrived at his desk before 6 am, his tie already loosened. Soon, his trousers would be sprinkled with cigar ash, his hands blackened by newsprint from ripping out newspaper articles to review with “my team,” as he liked to refer to his staff.


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He almost always ate lunch at his desk on the trading floor instead of in Lehman’s elegant 43rd-floor partners’ dining room. Instead of a windowed office overlooking New York’s East Side waterfront, he had private quarters off the trading floor that were windowless and cramped. It was dubbed “the chart room” because Glucksman, who loves boating and fishing, had hung navigational charts on the walls. On the trading floor, Glucksman worked in a glass-walled office known as “the fishbowl,” where his people could see him, feel his presence, hear him bellow profanities, watch his round face redden with rage, see him burst the buttons on his shirt or heave something in frustration, watch him hug or kiss employees to express appreciation. “Lew managed people...through a combination of fear and love.”6

Instead of pictures of fish or navigational charts, Peterson’s office walls were hung with signed lithographs and autographed photographs from, no doubt, highly prestigious, very close friends of his. He was particularly conscious of proper dress and behavior and was engaged in an elaborate social life. Glucksman concerned himself primarily with Lehman Brothers, spending most of his days at work or dining alone in a Chinatown restaurant.

Glucksman, prior to his elevation to co-CEO, had grown resentful of Peterson. He felt that Peterson was arrogant and condescending and that Peterson considered him to be a lowly trader. A history of conflict between bankers and traders in the investment banking industry had developed into a war of stereotypes at Lehman Brothers. Traders perceived bankers as elitist snobs, ivy-leaguers, who took long lunches, fawned over clients, and did not work too hard. Traders were frequently perceived by bankers as undereducated and crude robots, hic et nunc types. These stereotypes perpetuated a rift between the two groups that was most accurately portrayed by Peterson and Glucksman’s relationship. Peterson, in Glucksman’s opinion, spent too much time “cultivating clients over expensive meals, dropping names, worrying about his own press notices, behaving as if investment banking were still about the old-school relationships rather than market-responsive transactions.”7

Glucksman was concerned that Peterson was greedy, that he had plans to sell Lehman Brothers before he would be required to start selling his shares back, and that he distributed the firms’ profits unfairly. Sixty percent of the stock was allocated to Peterson’s “banker group,” which contributed less than one-third of the firm’s profits.

From Peterson’s perspective, Glucksman wanted more recognition and managerial freedom to make decisions. He felt responsible for much of its success in trading. “Lew built commercial paper into an $18 to $20 billion business. Even his more ardent critics will tell you that he was one of the best in the business at credit analysis.”8 It was these features that eventually convinced Peterson to promote Glucksman as his co-CEO. Peterson believed he was doing Glucksman a favor. He felt that the promotion had played a part in the transformation of Glucksman. He congratulated himself for helping him become a calmer executive, losing 70 pounds, and rehabilitating a wardrobe once dominated by light suits and wide ties. Glucksman, however, was insulted by the move: “It was a slap in the face, ...Another example of Pete’s unwillingness to let go when his interests were outside the business.”9 What Glucksman really wanted was for Peterson to announce plans to step down. In July of 1983, Glucksman’s resentment of Peterson


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had grown to such an extent that he decided to use his powers as Co-CEO to remove Peterson from the company altogether. Following his promotion, Glucksman met with Peterson to ask if he could run the business alone, suggesting that Peterson leave by September 30th. Although Peterson had not planned on leaving the company so soon, considering his options and the likelihood that he would secure excellent financial terms, he decided to accept Glucksman’s request. He announced his resignation to a stunned board on Monday, July 25, 1983.

Glucksman intended to bring peace and equity to Lehman Brothers, but his reign was instead characterized by dissension and upheaval that began with Peterson’s surprise announcement to the board. The board felt understandably deceived and insecure as their firm’s fate was decided without their consultation. No sooner was Glucksman at the helm when major changes began to occur. He reorganized the leadership of the firm, “shuffling jobs around and making enemies.”10 He reallocated profits, increasing bonuses for “his team,” the trader group, and decreasing those for bankers. He similarly redistributed the firm’s shares. He was accused of buying off key partners who could have blocked his actions and brought in new partners, established in the field, at income rates that partners resented because they felt it hurt their equity positions. Key partners began to leave. Internal turmoil increased. Business turned down in a negative market and serious capital problems arose. Even Glucksman was affected by the downturn. To some he began to appear more like Peterson. “He had very little time to say good morning.”11 Many were outraged by what they perceived as “Gluckman’s lust for power, his unwillingness to consult the board on an issue vital to the health of the partnership.”12 He seemed to manage the company as if he were trying to right past wrongs.

He allocated bonuses and the distribution of shares based not on what partners had traditionally received or on their status within the firm; rather, he strove to make decisions on what he said were “the merits” of each partners’ performance. In fact, many banking partners believed his decisions were too personal, meant to settle old scores. They believed that Glucksman was not controlling his demons.13

Still others criticized the board for being “preoccupied with their bonuses and their shares,”14 in what represented personal avarice and petty coalitions rather than the best interests of Lehman Brothers.

After less than a year under Glucksman’s management, the unsettled Lehman Brothers merged with Shearson/American Express.

Goldman Sachs and Company

On May 4, 1999, Goldman Sachs & Co., a New York City investment banking firm, ended its 130-year old partnership and went public with an initial public offering (IPO) of 6.9 million shares. Demand for shares was so strong that the IPO trading opened more than an hour late. At the close of trading, Goldman shares settled at $70 3/8, up 33% over the offering price of $53, making the market value of Goldman around $33 billion.15 Reinforcing its reputation for market timing, Goldman priced its IPO on the day the Dow broke 11,000. The IPO raised $3.7 billion and was the second-largest in history behind Conoco Inc's $4 billion IPO on 1998.16


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Once the largest remaining securities firm run as a partnership, Goldman's success is reflected in its 1998 pretax profits of $2.2 billion, as well as in its number-one ranking in mergers and acquisitions, according to Securities Data Co. These earnings cannot be casually explained in terms of sales and commissions. It is something else: a unity of beliefs, values, and ethics throughout the entire organization. In the words of former co-Chairman, John Whitehead:

There are some things about Goldman as an institution that make it unique: its team spirit, the pride in what we do, the high standard of professionalism, the service orientation.… That’s the essence of Goldman’s culture, the things that have made us what we are, and I would say that culture has been the key to our success.17

Culture of Success

Marcus Goldman founded Goldman & Company in 1869. When in 1882 he invited his son-in-law, Samuel Sachs, to join the firm, the company became Goldman, Sachs. Its first big corporate deal was an IPO by Sears, Roebuck in 1906. In the late twenties, Waddill Catchings led Goldman into trading, setting up an investment trust in 1928 which borrowed money to buy stocks on behalf of its shareholders. After the October 1929 crash, shares that had traded as high as $326 were trading at $1.75, Catchings was forced out, and Goldman's reputation was in ruins. In 1930, Sidney Weinberg took over leadership of Goldman, which he retained until 1969. He steered the firm away from business he saw as too risky--making bets with the partners' capital or managing the public's money--and refocused on advising major corporations.18 He also lived the firm's core values: client service and long-term focus. "Simple as it sounds, the firm's success can be traced to its iron grip on these two values, along with the incentive structure created by its partnership."19

The firm’s partners are its owners and therefore share the firm’s profits. These profits are distributed to individual capital accounts for each partner. In 1997, each partner’s capital account rose between $3 million and $25 million, depending upon the number of shares they owned at year-end. These profits are left in the firm (even for some time after a partner retires). Therefore, the capital invested during the normal course of business belongs to the partners themselves, rather than to a corporation or external stockholders. Most partners have more than 80% of their personal assets tied up in the firm. “Everything all of us have worked for all of our lives is in this place,” says Robert Katz, Goldman’s General Counsel.20 Since it is their own money on the line, partners are very disciplined and profit-oriented. Nonpartner employees share this mentality because they aspire to reach partnership ranks. “[The partnership system] is the best motivational and organizational structure for us and for our business plans. There’s tremendous allure to stimulate people,” says one partner.21

In addition to the firm’s partnership structure, the joint leadership of John Weinberg and John Whitehead was a major influence on its culture. Weinberg and Whitehead had been a part of the firm since the late 1940s and co-CEOs from 1976 through 1990. Their commitment to traditions, loyalty to clients, and subordination of their own individual egos through power sharing and teamwork for the good of the firm worked to generate and maintain the culture that has been the


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key to Goldman’s success. Under their tenure, the company displayed a well-forged emphasis on entrepreneurial aggressiveness, self-effacing teamwork, a shared knowledge of what the business would and would not do, homegrown talent, and, moreover, a commitment to serving the customer above all other interests. Lisa Endlich, a former Goldman vice president and foreign exchange trader, has recently published a history of the firm Goldman Sachs: The Culture of Success, which offers several examples of the emphasis on client service and the long-term view at Goldman. After the stock market crash in October 1987, Goldman faced a loss of $100 million on underwriting the sale of 32% of British Petroleum. Other American underwriters began reviewing their commitments, looking for a way to reduce their exposure.

Weinberg never flinched. At a meeting of the syndicate members held to discuss their plight, Weinberg spoke forcefully to his fellow bankers, "Gentlemen, Goldman Sachs is going to do this. It is expensive and painful, but we are going to do it. Because if we don't do it, those of you who decide not to do it, I just want to tell you, you won't be underwriting a goat house. Not even an outhouse." To Weinberg, even at $100 million (approximately 20 percent of the firm's 1986 earnings), it was an open-and-shut case.22

After taking losses on British Petroleum, many other firms retreated from the privatization business in Europe, allowing Goldman Sachs an open field and an even bigger market share.

The espirit de corps was so strong that one partner noted, “If you polled people here and asked them why they work so hard, they would probably say that there’s nothing else in their lives that gives them nearly the charge that their work does." Indeed, the investment banking industry places tremendous demands upon its employees. Most people work six-to-seven days a week, often from early morning until 10 pm or later. Take-out meals in the office are a regular occurrence. Dedication to such a lifestyle is imperative in order to succeed in the industry. As a result, maintaining personal relationships can be extremely difficult, and these strains do take their toll on people. The conditions at Goldman Sachs are no exception. In fact, for years the firm was rumored to have the highest divorce rate on Wall Street.23

At Goldman Sachs, as at other investment banking firms, greed is prevalent. Yet during the Weinberg and Whitehead era, this greed was channeled in such a way that it worked for and benefited the entire firm. There was no backstabbing or selfishness; no “star system.” Rather, it was “all for one and one for all.”24

The thrust of the Goldman culture has been its indomitable team spirit. Partners and staff “gang tackled” problems with a near mania for interdepartmental and interpersonal communication and coordination. Credit has always been given “loud and clear” to everyone who participated in a deal. In another of Lisa Endlich's anecdotes, she relates the story of Janet Hanson, a family friend of John Whitehead, who got a job selling bonds for Goldman. "At first, she sent Whitehead copies of all her transactions, which were pitiful by the firm's standards, and wrote on them, 'I did this trade.' For months, Whitehead ignored her missives. One day, he called and said, simply, “Janet, at Goldman Sachs we say 'we'. We never say 'I.'"25 Even today, the company strictly adheres to 14 business principles to help preserve its culture (http://www.goldman.com/ about/principles.html).


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Culture was passed from one generation to the next. To assure the acculturation of the teamwork and other values at Goldman Sachs, the organization “grew” its own talent with entrenched recruitment and training programs. Out of 1,500 applicants one year, only 30 individuals were given jobs; they were the ones with brains, humor, motivation, confidence, maturity, and needless to say, an inclination to play on the team. Once a young person was hired, he or she usually spent a career with the same department. Thus, all departments within Goldman Sachs traditionally had a deep bench of expertise with viewpoints that were similar.

Of course, inbreeding causes insularity, but again, unlike at other organizations, this too has benefited Goldman Sachs. The firm took pride in its aloofness and was not even interested in how its competition was doing things. Outsiders were rarely brought into the organization, and the great majority of the firm’s then 75 partners had been with the company for 10 to 20 years in 1991.

Weinberg and Whitehead continued and codified the distinct traditions in doing business established by Sidney Weinberg and his successor, Gus Levy. Service and loyalty to the customer were paramount. They strictly adhered to certain standards about with whom the company would do business. Clients must have sound management of their operations, produce only high-quality goods and services, show profits for all their business, and also benefit the public in some way. Other such standards included Goldman Sachs’ refusal to underwrite any dealing involving nonvoting stock (a violation of the belief that shareholders should have voting rights) and its refusal to participate in unfriendly tender offers.

The culture at Goldman Sachs emphasized a unique “loose-tight” management style, where the organization is rigidly controlled at the top concerning operational procedures and overhead, yet each department is allowed autonomy concerning entrepreneurship and innovation. The effectiveness of this management approach has been reflected in the success of the company. In 1984, the company’s profit margins were the widest in the investment banking industry. Over recent years, however, changes in the investment banking industry have changed Goldman Sachs.

The Effects of Hypergrowth

The hypergrowth of leading investment banking firms and the 1987 market crash provoked Goldman Sachs to behave in ways that were incongruent with its culture. The firm has hired and fired numerous employees. Homegrown talent and lifetime employment are no longer basic characteristics of Goldman Sachs. Once, a new employee was expected to rise through the ranks to ensure complete adoption of the company’s value system. Now, newcomers are starting as partners. In order to bring in experience to lead new areas of growth, the company has hired prominent employees from other firms and placed them immediately in key positions.

Goldman Sachs called in the Delta Consulting Group in response to growing concerns over internal tensions and resentments. Eleven current and former partners discussed, among other issues, ego and greed problems, a generation gap with respect to values, and a rise in staff defections.


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The greed that once drove the company towards unified excellence now seems to be causing internal problems. A new kind of greed has emerged within the company. Increased hiring has brought in a large number of younger employees who have not had the time to absorb the culture that discourages individualistic greed and encourages loyalty and teamwork. This new generation of Goldman employees has a selfish greed, which could erode the team spirit that has kept Goldman together.

In hiring experts from the industry to fill high level positions before they have been properly acculturated, Goldman Sachs has introduced yet another breed of greed--an inflated sense of self and an enormous need for recognition. This greed is especially dangerous since it exists among those who are leading the company.

These changes have not gone unnoticed by others at Goldman Sachs:

In one comment that the [Delta Group] study highlighted,...a partner said, “The greediness of people is the one thing I dislike the most of what I see.” Another partner said: “In the old days, when you became a partner, you would feel free to give your wallet to another partner to hold for safe-keeping. I do not think it is that way today.”26

The nature of greed is not the only cultural aspect that has been affected. Goldman Sach’s hasty hiring and neglect of appropriate acculturation has destroyed the mechanism for its insularity. Outsiders are being brought into the organization all over the place.

Two examples: Commodities veteran Daniel Amstutz left a 25-year career at Cargill to lead Goldman’s commodities department, Michael Mortara left Salomon Brothers to help lead Goldman’s mortgage-backed securities department just two years ago.27

Nearly half of Goldman Sach’s employees have been there less than three years. For Goldman, where inbreeding has been of key importance to its cultural maintenance, this could introduce problems. “It’s unbelievable,” laments one Goldman department head, “I have the ‘twos’ [two-year veterans of the firm] teaching the ‘ones.’”28 How to train and infuse these newcomers with Goldman ideals is a problem for management. Whether these employees have the maturity or judgment to handle the responsibilities of their positions, especially in turbulent market environments, and the loyalty that years with the firm cultivates is a concern for many at Goldman Sachs. Managing a larger “family” has made integrating individuals within teamwork settings difficult. H. Grederick Krimendhal, the Goldman partner in charge of operations and administration, concedes that “everyone is uncomfortable with the rate of growth. We all feel that if we don’t keep expanding, we’ll lose our position. But if we keep growing at a certain rate, we’ll lose control.”29 “The traditional answer to growth has been to separate producers from managers,” reasons Goldman vice president Peter Mathias. “But for our business, if managers aren’t in close touch [with the markets] they lose credibility.”30

One way to manage the rapid growth and turbulent conditions would be to impose bureaucratic devices, such as high formalization. However, this could be self-defeating because it would


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decrease flexibility. Despite Goldman’s hesitation in implementing such devices, the firm has an elaborate employee review process. Guidelines for critiquing performance are kept in a phonebook-sized binder. The meticulous procedures used to evaluate, review, and manage associates create a “deep bench of well-trained employees,” which enables Goldman to seamlessly replace retiring partners. According to a former employee, “The leader isn’t important. It’s the organization of the anthill.”31

There has been a growing resentment amongst the older generation of Goldman employees. They have given their lives to the company with the hope of winning ones of the precious partnership spots that they now see newcomers filling. This has left them understandably bitter and has led to numerous staff defections and early retirements. Two partners agreed, “We lost ten people who have been here three to five years who we thought would be stars/producers.”32

Hypergrowth and market decline have also disrupted some business traditions at Goldman Sachs, and with them, the company’s fundamental nature. Black Monday (October 19, 1987) forced Goldman into widespread layoffs. This was an unprecedented move for the company. “There is a slight feeling that the contract with employees has been broken.”33 Another partner commented: “Goldman Sachs used to be paternalistic. Now we’ve become tougher in a more competitive world. Some would even say we’ve become ruthless.”34

In addition, the firm traditionally maintained a reputation for not participating in hostile takeovers. For clients taking part in an unsolicited or contested bid, Goldman would hire another firm to complete the transaction. In 1988, for example, Goldman hired then Shearson Lehman Hutton to arrange the tender offer for BAT Industries’ hostile takeover of Farmers Group.35 In 1989, however, Weinberg ended the tradition of refusing to represent a hostile bidder. The profitability of these takeovers and the threat of competition made them difficult for the company to resist. Although the firm still prefers friendly deals, Goldman pitched three hostile takeovers in 1997.

Acculturation Issues

The company has had additional problems incorporating women and minorities into their senior ranks. They claim that they find it difficult to recruit successfully among these groups and that is why there is an absence of woman and minorities in their top management positions. These groups have also had problems assimilating. In 1990, five women quit Goldman in order to form their own “boutique” investment firm. The women wanted to pursue their dreams of entrepreneurship, which Goldman seemed unable to fulfill. In another instance, former investment banker Rita Reid claimed she was passed over for promotion to partner and subsequently dismissed from the firm because of sexual discrimination. Goldman, however, was cleared of these charges by a NYSE arbitration panel.36 It is interesting to note that while Goldman Sachs maintains that appointment to partnership is based on merit (i.e., impact to the bottom line), only 11 of the 190 partners are women. Further, there are only 18 women among the firm’s 285 managing directors--a middle tier of management added to the firm in 1996. Even Abby Joseph Cohen, Goldman’s chief equity strategist and co-head of the firm’s investment policy committee, was passed up for partnership status in 1997, despite her mass-market appeal and uncanny ability to predict the market and properly advise clients in making investment


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decisions. When questioned about the status of Ms. Cohen, a Goldman spokesman replied, “We don’t discuss partnership selections.” 37 It wasn't until 1998 that Ms. Cohen was elevated to partner.

Problems of acculturation have not arisen unchallenged by Goldman Sachs. The company has hired consultants to advise them on management techniques and developed programs designed to integrate new arrivals into their corporate culture and to generate a sense of involvement. These include management and leadership seminars and orientation programs. “Classroom exercises range from a Goldman Sachs culture game--akin to Trivial Pursuit--to role playing. Sample question: What was the first issue Goldman Sachs ever did? [Answer: one for United Cigar Manufacturing Co.] In role playing, different teams represent Goldman’s competitors and discuss their various strengths and weaknesses and what they imply for the strategy of the home team--Goldman.”38 Goldman answers the problems of growth and control with the same ideal it maintained from day one--teamwork. “When the firm’s new investment banking chief, Geoffrey Boisi, organized a seminar for the client-coverage group, he invited Red Auerbach, president of the Boston Celtics to address the name-tag-decked, 270-strong gathering on ‘winning.’”39

Teamwork, indeed, has continued to triumph at Goldman. Efforts to give even the lowliest associates a sense of belonging by enlisting their participation in decisions and keeping them well informed on developments affecting the firm have helped to alleviate resentment. Also, training has stressed specialization, as well as a basic understanding of general issues, so teams can form and disband efficiently and flexibly. Goldman Sachs’s number-one position in mergers and acquisitions is also a testament to the firm’s cohesiveness. Rather than fighting over who gets a particular client fee, employees actively share information and work together to mobilize company resources to get a job done.40

Supporting Company Growth

Although Goldman’s hiring of experts outside their firm has caused resentment and acculturation problems, it has also supported the company’s growth. As products have become more specialized, new expertise has kept the company head-to-head with its competitors in a fast-paced race. A tradition of caution has afforded Goldman protection from losses other firms have incurred in junk bonds and bridge loans. “Our approach is dull,” concedes former Vice Chairman Robert E. Rubin, “But it’s not a bad way to run a business, [and] we have been working for some time to make sure we are there with new products and to stay on the cutting edge.”41 Trailblazers they may not be, but this has not had a negative effect on their profitability.

While the firm continues to be cautious about expanding into new areas, Goldman is expanding rapidly overseas.42 For example, in late 1996 John Thorton, CFO and co-head of Goldman’s European operations, was appointed to head the firm’s new Asian operations. Additionally, the German market for investment banking has been developing rapidly, with a growing volume of merger and acquisition business. Driven by tough competition and rising costs, German companies are increasingly seeking outside advice, leading to investment banking firms vying for this business. Goldman Sachs has one of the strongest market positions in Germany, having built up its operations early.43


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With offices sprouting up around the world, maintaining a cohesive culture is increasingly difficult. Since Goldman places heavy emphasis on client relations, it is important that offices be staffed with employees who understand local issues. As a result, new locations require bringing people with diverse backgrounds into the firm. Further, it is not feasible to closely monitor the actions of employees separated by thousands of miles, and sharing information and mobilizing resources around the world can be a complex process. For example, take a 1996 deal within Goldman’s equity and fixed-income divisions. The firm completed an equity trade involving a $2 billion block of British Petroleum Co. stock in 12 hours, one of the largest block trades ever:

After the close of business in London on May 14, Goldman got a call from advisers to the Kuwait Investment Authority asking for a bid. Goldman had pursued the deal for several years, but only had an hour to decide if it wanted to risk $2 billion to bid for the stock. An hour and a half later, Goldman bought the shares. Then, the firm mobilized hundreds of professionals to sell them. Before the London markets opened the next morning, the stock was sold to 500 institutional and individual investors--and Goldman pocketed $15 million.44

To further complicate matters, increasing competition for global deals is driving down profit margins. Even under these pressures, Goldman is performing well. Says Goldman Managing Director Peter Weinberg (John Weinberg’s nephew), “We work with each other better around the world, across borders…. One of the reasons we do it is that this is an economic partnership.”45

A further reflection of Goldman Sach’s rapid growth is the number of partners, which more than doubled from 75 in 1991, to 190 in 1998. Expansion, both internationally and into new business areas such as asset management, poses a challenge to Goldman’s cohesive culture. Large groups of people are more difficult to control than small groups, and international offices are trickier to monitor than are those in the United States. Additionally, rapid growth makes it increasingly difficult for the firm to find individuals who will fit into the Goldman culture.

Goldman’s $3 billion in 1997 pretax profits were an all-time high for the firm. In addition to its number-one ranking in global mergers and acquisitions, the firm is considered a top bond house for fixed income and has 215 research analysts. For an overview of Goldman’s financial position, refer to their annual review. (www.goldmansachs.com/about/annual/1998/4_fs/index.html). Goldman has retained its top position in the areas in which it chooses to compete, despite the fact that the firm has been affected by the side effects of hypergrowth--assimilation of newcomers brought in to stimulate growth, the need to raise large amounts of capital, and competitive pressure to expand overseas.

A Break with the Past

Since the 1996 vote to retain the partnership, a number of new factors came into play. There was a great run up in the stock market, increasing the potential value of an initial public offering (IPO) to the partners. Some partners felt the need for personal financial protection from losses such as those experienced in 1994, when trading losses combined with the sudden resignation of senior partner Stephen Friedman and 36 other partners, left Goldman capital deficient. Many partners came to believe that there was a need for more capital and public stock to take


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advantage of growth opportunities, including those that come from increased globalization as well as from specific market niches, such as asset management. Many partners concluded that more capital was required to defend the firm from new competitors formed by megamergers, such as Travelers.

Going public was first openly discussed at Goldman at the annual partnership meeting in December 1986. The proposal from the management committee, championed by Robet Rubin and Stephen Friedman, who would later lead the firm, ran into serious opposition from the partners. John Weinberg, then senior partner, distanced himself from the proposal, remaining silent during the meeting. When Sidney Weinberg’s other son, Jimmy, spoke against the proposal, the matter was set aside without even a vote.46 However, an important concept came out of the December 1986 meeting: the firm clearly believed in a global business strategy. The decision to expand has placed additional capital pressures on the firm, making its remaining a partnership less and less feasible.

When Jon Corzine became Goldman's chairman in 1994, he again raised the idea of issuing shares. In January 1996, Corzine raised the issue once again in response to three environmental factors: 1) the bullish stock market, 2) the successful public stock offering of Goldman’s formerly private competitor Donaldson, Lufkin & Jenrette, and 3) Goldman’s handsome $1.37 billion profit for fiscal year 1995. Both in 1994 and 1996, the partners opposed it because "(a) the firm wasn't really theirs to sell, since they were merely temporary occupiers of a great historical franchise, and (b) the partnership structure was central to the firm's unique culture."47 Although Corzine apparently still favored an IPO, he needed to forge a consensus among the partners.48 The executive committee of the firm contained strong opposition, including John Thain and John Thornton, often labeled heirs apparent to Goldman leadership.49 Even Henry "Hank" M. Paulson Jr., the number-2 man at Goldman, didn't embrace the idea.50 Corzine appointed a small group to review the firm’s capital structure early in 1998. Among other things it analyzed what a public Goldman would look like compared to its competitors. Corzine concluded that there were many opportunities that Goldman could take advantage of, such as in asset management. Some committee members were concerned about the firm’s ability to compete with just $6.3 billion in capital.51 Thain, who was chief financial officer disagreed, arguing in the executive committee that Goldman had all of the capital it required.52

Corzine eventually gained Paulson's support, some say by agreeing to make Paulson a co-chairman.53 Corzine and Paulson then asked Goldman’s operating committee and partnership committee whose members totaled 39 of the 189 partners to discuss an IPO at their upcoming meetings in May.54 This was the turning point. The vast majority came to favor an IPO, although a few voiced concern about destroying Goldman’s culture. Key committee members had many reasons for going public, varying from the threat of larger competitors to protection of their capital from the large losses that resulted in the exodus of 36 partners in 1994. Some thought that stock could be an important motivational tool. In effect it “was important to bind more employees to the firm through equity ownership.”55 The enthusiastic support of these committees led to the calling of a general meeting of the partners in June to consider an IPO.

The meeting began on Friday, June 12, with Paulson urging the partners to consider the long-term interests of the firm. Regardless what the decision was going to be, Corzine and Paulson


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wanted to achieve a consensus among the partners. This was followed by a number of presentations that analyzed the potential impact of an IPO on the firm’s culture and capital position. The next morning an often passionate six hour debate took place. Some described it as a Quaker-style meeting, with more than 100 partners speaking.56 At the outset the group was almost evenly divided on the merits of a public offering.57 One partner, Sharmin Mossavar-Ramani, pointed out that her entire capital account was wiped out during the 1994 plunge. A stock offering would eliminate such a risk in the future.58 Corzine said that it was time to spread the wealth over a wide number of employees.59 On the other hand, Philip Murphy, president of Goldman Sachs Asia argued that for him “the partnership meant ‘diving for every loose ball and going anywhere at any time for any reason.’”60 Another partner likened an IPO to crossing the Rubicon, it would be a move that would be irreversible.61 Toward the end of the meeting, Murphy disputed the argument that the firm needed more capital to compete, saying “We are outgunned by the competition in terms of resources and people, but we still beat these guys. For anyone in the U.S. to think that we are second-class citizens internationally, you are wrong.”62 In the end, “the prime fear was that a public company could never replicate the close-knit culture of a partnership, where financial rewards are measured in lifetimes instead of months.”63 Robert Katz, general counsel, had argued at an earlier meeting that the partners should distinguish between culture and partnership structure, stating that “There are investment banks that were snake pits when they were partnerships and they still are today…. Culture is what you do every day and not who you are.”64

The meeting ended with Corzine’s reading of a letter sent by John Whitehead and John Weinberg, Goldman’s highly respected leaders in the 1980s, opposing the IPO. Their points included the famous admonition, “If it ain’t broke, don’t fix it.”65 Before adjourning, partners filled out a brief confidential questionnaire on the plan. The executive committee was empowered to make a recommendation. The committee met that Saturday evening. It was apparent that there was a consensus for a public offering. In that spirit, Thain and Thornton, members of the executive committee opposing an IPO supported the plan as did many of the other partners who had opposed it. A few weeks later the partners voted overwhelmingly to go ahead with the plan.

Many outsiders as well as a number of limited partners interpreted the deal as an act of greed. Corzine vehemently disagreed. “Contrary to what you might read, we are not doing this because of the money…this is not about money or cashing out.”66 Partners pointed out that the deal was necessary for preparing Goldman “for a new era--one in which only the most global banks with the resources to fight for business, in any major economy will prosper. Increasingly, these people say, Goldman’s private partnership is a handicap in that race.”67 For example, it was asserted that the partnership held the firm back “largely because it lacks a public currency such as stock.”68

Paulson claimed that Goldman’s strategy was not seeking to emulate its major rivals, stating that "We don't think being a financial conglomerate is the way to go.”69 He also indicated that Goldman would not get into retail. Nor would it form an alliance with a commercial bank. Corzine said, “We intend to be the pre-eminent, independent global investment bank.”70 Apparently Goldman’s top priority is to increase its asset management business, which already has some $160 billion under management. In addition, Corzine indicated that the funds will lead to “some new strategic opportunities, and we will go into acquisition mode…. I am not talking


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about mergers, but acquisitions.” 71 On a global basis, this apparently means expansion in Japan and Europe. In the U.S., it means an expansion of its private clients services business.

Corzine and Paulson also made it clear that a high priority use of the funds raised through the IPO was to hire more key professionals.72 In fact, even before, the IPO was approved by the partners, Goldman recruited Michael Carr, co-head of Traveler’s global mergers and acquisition group.73 It has been reputed that Goldman has been offering such recruits promises of stock valued as high as from $10 to $25 million to join the firm.74

In order to keep key staff people Goldman decided to share the proceeds of the IPO in a very broad manner, unlike many other Wall Street firms that merged or went public. The 13,000 current employees below the level of partner shared a 21.2% stake worth close to $7 billion. The 221 current partners retained 48.3%, and the 125 retired partners received 8.5% of Goldman stock. New partners received about $20 million while senior partners received up to $300 million.75 However, only the partners' share vested immediately. Employee shares were to vest over three-to-five years, which should help ensure retention.76

Though the public offering seemed to be quite lucrative to many, others found it almost insulting. In particular many of the limited partners were deeply disturbed with the financial considerations they received. Limited partners are individuals who have retired from full partnership or left the firm. Many retain a capital position in Goldman. A number felt they were being given a very bad financial deal. Apparently there was even a decision to charge limited partners for the office space and secretarial support they had previously received for free. John Whitehead articulated the concerns of many limited partners who believed that their historic contributions to the firm were being seriously undervalued.77

Conclusion

Paulson and Corzine indicated that they remained committed to maintaining Goldman’s culture “of self-effacing, behind-the-scenes teamwork and to preserving as many elements of its partnership as possible.”78 As a partnership, Goldman was able to keep most of its internal conflicts private. Now that it is a public company, subject to scrutiny by shareholders, analysts, and the press, Goldman may have a much more difficult time maintaining its mystique. Tensions between investment bankers and traders became apparent when trading losses of $664 million were incurred during 1999’s market drop.79 Corzine's decision to take a lead role in the bailout of Long-Term Capital Management, the overleveraged hedge fund, cost an additional $300 million. Other senior partners believed that the fund should have been allowed to go under. Combined, these losses seriously diluted the earnings of the investment banking division. Paulson and Thornton, career investment bankers, along with Thain, who has worked both as an investment banker and a trader, forced Corzine, a career trader, to step down as co-chairman in January 1999. As a result, Paulson has become Goldman's sole chief executive.80 Not since Waddill Catchings in 1930 has a leader of the firm been forced out.81 Corzine ended his formal relationship with Goldman after the IPO was completed, leaving with more than $300 million. He is now considering a run for the U.S. Senate seat currently held by Frank Lautenberg of New Jersey.82 Paulson, who owns shares valued at $289 million, takes a more risk-averse approach to the business, perhaps appropriate given that Goldman has sustained fairly substantial


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losses on its trading desks in three of the last five years. Analysts expect the firm to continue to reduce its dependency on trading.

There are indications that Goldman may be losing its grip on its core values of client service and long-term focus. Goldman was not chosen to represent British Petroleum, a frequent client, on the $52 billion Amoco deal, which some sources claim was an unpleasant surprise. And Goldman has slipped from number-1 to number-3 in the IPO rankings, losing 6.3% of its market share, according to Securities Data Co.83

Goldman's involvement in the Russian bond market in 1998 may be a sign of a possible change in Goldman's famous long-term focus and ethical standards. In June 1998, Goldman helped the Russian government raise money by selling $1.25 billion in bonds. Part of the proceeds raised went to pay off a $500 million bridge loan made by Goldman to the government in late 1997. Goldman made the loan to beat out rivals for the government's advisory and underwriting business. "Rival bankers and investors say the bridge loan raises the question of a conflict of interest because Goldman, with nearly 4 percent of its partners' capital tied up in that one loan, was highly motivated to market the June bond deal--and make sure that it was big enough for Russia to pay Goldman back."84 In July, Goldman arranged a deal to swap Russia's short-term debt for long-term debt, earning fees of about $56 million. In August, Russia defaulted and the bonds Goldman sold are now nearly worthless. Goldman, however, managed to sell its own holdings before the crash and said its losses were "absolutely minimal." Several bankers believe that "Goldman accumulated its holdings of Russian bonds specifically to create momentum for its swap deal, then quickly sold the bonds when the deal was done."85 Goldman confirms that its trading position on Russian debt "went from 'quite long' in the days around the swap to 'flat' or even 'short' by August."86 Although many investment banks played a role in the rise and fall of the Russian economy, Goldman's tactics were among the most aggressive. Paul A. Volcker, the former chairman of the Federal Reserve, said "What the Russian problem reflects is that today's bankers often don't have long lasting concerns about customer-client relations.… You just do the deal and get out."87

Despite the requirements of a public company for public disclosures of its finances, Goldman is trying to retain as much of its private partnership management style as possible. Its 17-member management committee remains in charge, although the larger group of former partners is less powerful now. It has employed its best corporate financiers "to ensure that the firm is completely immune to any [takeover] approach."88 Also, much of the stock is restricted and can be sold only after several years. Goldman placed about 70% of the offering with institutional investors they believed would remain loyal, long-term holders.89

"'Money is always fashionable,' Henry Goldman regularly reminded his nephew, Walter Sachs."90 And greed has long been part of the Goldman Sachs culture. However, Gus Levy, the Goldman chairman in the early 1970's, defined Goldman's business philosophy as “greedy, but long-term greedy.” Partnerships were key to maintaining that long-term view. In a letter to the firm, John Whitehead wrote "I don't find anyone who denies that the decision of many of the partners, particularly the younger men, was based more on the dazzling amounts to be deposited in their capital accounts than on what they felt would be good for the future of Goldman Sachs."91 "People have come to Goldman Sachs despite the promise of very long hours and


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possibly less compensation, because becoming a partner at Goldman Sachs was the brass ring. It was the highest accolade on Wall Street, and now that no longer exists."92

Analysts agree that the move from partnership to public company may adversely affect Goldman's ability to attract and retain high quality employees. Goldman has gone through far reaching changes in governance and financial structure. One can only wonder whether Goldman's conduct in the Russian bond market and the apparent conflict between Corzine and Paulson are aberrations caused by the process of transitioning to a public company or indications of severe problems in the future. Certainly many former partners have wondered out loud whether Goldman will be able to maintain its culture.

© Copyright 1991, Richard D. Freedman

Endnotes

1 The authors wish to thank Sharon Simon and Julia Dillon for their help revising this case. 2 Robert G. Eccles and Dwight B. Crane, Doing Deals (Boston: Harvard Business School Press, 1988), p. 49. 3 Ken Auletta, “The Fall of Lehman Brothers,” New York Times Magazine, Part 1, February 17, 1985, p. 36. 4 Ibid., p. 40. 5 Ibid., p. 34. 6 Ibid., p. 33. 7 Ibid., p. 30. 8 Ibid., p. 33. 9 Ibid., p. 30. 10 Ibid., p. 59. 11 Ibid., p. 36. 12 Ibid., p. 60. 13 Ibid., p. 92. 14 Ibid., p. 39. 15 Charles Gasparino, “Goldman IPO Lives Up to Expectations, Posts 33% Gain in First Trading Day,” The Wall Street Journal, May 5, 1999. 16 Peter Viles and Jack Cafferty, “Goldman Sachs' IPO,” CNNfn, May 4, 1999. 17 Beth McGoldrich, “Inside the Goldman Sachs Culture,” Institutional Investor, January 1984, pp. 53-67. 18 John Cassidy, “The Firm,” The New Yorker, March 8, 1999, pp. 29-30. 19 Lisa Endlich, Goldman Sachs, The Culture of Success (New York: Alfred A. Knopf, Inc., 1999). 20 Leah Nathans Spiro, “Inside the Money Machine,” Business Week, December 33, 1977, p. 86. 21 Peter Truell, “Goldman, Sachs Partners Decide Not to Sell, After All,” The New York Times, January 22, 1966. 22 Lisa Endlich, Goldman Sachs, The Culture of Success (New York: Alfred A. Knopf, Inc., 1999). 23 Beth McGoldrich, “Goldman Sach’s Clubby Culture,” Institutional Investor, July 1992, p. 82.


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24 Ibid., pp. 53-67. 25 John Cassidy, “The Firm,” The New Yorker, March 8, 1999, p. 30. 26 Alison Leigh Cowan, “An Exercise Introspection Lets Goldman Bare Its Soul,” The New York Times, January 25, 1990, p. D1. 27 Jack Willoughby, “Can Goldman Stay on Top?” Forbes, September 18, 1989, p. 154. 28 Henny Sender, “Too Big for Their Own Good,” Institutional Investor, February 1987, p. 63. 29 Ibid. 30 Ibid., p. 64. 31 Leah Nathans Spiro, “Inside the Money Machine,” Business Week, September 22, 1997, p. 86. 32 Alison Leigh Cowan, “An Exercise in Introspection Lets Goldman Bare Its Soul,” The New York Times, January 25, 1990. 33 Ibid. 35 Michelle Celarier, “With Friends Like These…,” Euromoney, July 1997. 36 Anita Raghavan, “A Big Board Panel Decides in Favor of Goldman Sachs in Sex-Bias Case,” The Wall Street Journal, April 10, 1995, p. B8. 37 Peter Truell, “The Wall Street Soothsayer Who Never Blinked,” The New York Times, July 27, 1997. 38 Henny Sender, “Too Big for Their Own Good,” Institutional Investor, February 1987, p. 65. 39 Ibid, p. 64. 40 Leah Nathans Spiro, “Inside the Money Machine,” Business Week, December 22, 1997, p. 86. 41 Jon Friedman, “How Playing the Tortoise Paid Off For Goldman Sachs,” Business Week, May 7, 1990, p. 131. 42 Leah Nathans Spiro, “Inside the Money Machine,” Business Week, December 22, 1997, p. 86. 43 Andrew Fisher, “New Designs on German: Corporate Restructuring is an Opportunity for Foreign Investment Banks but a Culture Shock for Domestic Rivals,” Financial Times (London), September 13, 1997, p. 27. 44 Leah Nathans Spiro, “Inside the Money Machine,” Business Week, December 22, 1997, p. 86. 45 Ibid. 46 Lisa Endlich, Goldman Sachs, The Culture of Success (New York: Alfred A. Knopf, Inc., 1999). 47 John Cassidy, “The Firm,” The New Yorker, March 8, 1999, p. 35. 48 Peter Kahn and Joseph Truell, “Goldman, Sachs Nears Decisive Talks on Going Public,” The New York Times, June 2, 1998, p. D3. 49 Anita Raghavan, “Goldman, Wall Street’s Holdout, To Go Public,” The Wall Street Journal, June 15, 1998, p. A1. 50 Leah Nathans Spiro , Gary Silverman, and Stanley Reed, "The Coup at Goldman,” Business Week, January 25, 1999, p. 88. 51 Peter Truell and Joseph Kahn, “Goldman, Sachs Nears Decisive Talks on Going Public,” The New York Times, June 2, 1998, p. D3. 52 Anita Raghavan, “Why is Goldman Sachs Seeking To Go Public? It is a Capital Question,” The Wall Street Journal, August 7, 1998, p. A1. 53 Joseph Kahn, “This Time, Shared Reins Didn't Work at Goldman,” The New York Times, January 13, 1999, p. C7. 54 Anita Raghavan, “Why is Goldman Sachs Seeking To Go Public? It is a Capital Question,” The Wall Street Journal, August 7, 1998, p. A1. 55 Ibid.


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56 Joseph Kahn, “Plan To Go Public At Goldman, Sachs,” The New York Times, June 15, 1998, p. D1. 57 Ibid. 58 Anita Raghavan, “Why is Goldman Sachs Seeking To Go Public? It is a Capital Question,” The Wall Street Journal, August 7, 1998, p. A1. 59 Ibid. 60 Ibid. 61 Ibid. 62 Ibid. 63 Joseph Kahn, “Plan To Go Public At Goldman, Sachs,” The New York Times, June 15, 1998, p. D1. 64 Raghavan, Anita, “Why is Goldman Sachs Seeking To Go Public? It is a Capital Question,” The Wall Street Journal, 8/7/98, p. A1. 65 Ibid. 66 Joseph Kahn, “Goldman Goes For A Bit Of Gusto,” The New York Times, June 16, 1998, p. D1. 67 Ibid. 68 Anita Raghavan, “Goldman, Wall Street’s Holdout, To Go Public,” The Wall Street Journal, June 15, 1998, p. A1. 69 Joseph Kahn, “Goldman Goes For A Bit Of Gusto,” The New York Times, June 16, 1998, p. D1. 70 Ibid. 71 Ibid. 72 Anita Raghavan, “Goldman Sachs Hires Travelers’ Car For Mergers Group As It Shops For Talent,” The Wall Street Journal, August 7, 1998, p. B6. 73 Laura Holson, “Salomon Smith Barney Executive Joins Goldman,” The New York Times, August 7, 1998, p. D18. 74 Ibid. 75 Joseph Kahn, “Even a Tiny Slice of a Big Pie Tastes Rich,” The New York Times, March 17, 1999. 76 Amy S. Butte and Brian P. Englebert, Bear Stern Equity Research Report on The Goldman Sachs Group, Inc, June 1, 1999, p. 4. 77 Joseph Kahn, “Goldman, Sachs Tries to Soothe Limited Partners,” The New York Times, July 30, 1998, p. D1. 78 Joseph Kahn, “Goldman Goes For A Bit Of Gusto,” The New York Times, June 16, 1998, p. D1. 79 Henry H. McVey, Morgan Stanley Dean Witter Equity Research Report on Goldman Sachs, June 8, 1999, p. 3. 80 Leah Nathans Spiro, Gary Silverman, and Stanley Reed, "The Coup at Goldman,” Business Week, January 25, 1999, pp. 88-90. 81 John Cassidy, “The Firm,” The New Yorker, March 8, 1999, p. 36. 82 James Dao, “Unknown but Rich, Corzine Becomes a Top Contender for Senate,” The New York Times, May 12, 1999. 83 Leah Nathans Spiro, Gary Silverman, and Stanley Reed, "The Coup at Goldman,” Business Week, January 25, 1999, p. 90.


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84 Joseph Kahn and Timothy L. O'Brien, “For Russia and Its U.S. Bankers, Match Wasn't Made in Heaven,” The New York Times, 10/18/98, Section 1, p. 1. 85 Ibid. 86 Ibid. 87 Ibid. 88 Staff, “Goldman IPO Earns Bank $155m in Fees,” London Financial News, May 10, 1999. 89 Charles Gasparino, “Goldman IPO Lives Up to Expectations, Posts 33% Gain in First Trading Day,” The Wall Street Journal, May 5, 1999. 90 Richard Bernstein, “How Goldman Sachs Circled the Globe, Proving Money Makes the World Go Around,” The New York Times, February 22, 1999. 91 John Cassidy, “The Firm,” The New Yorker, March 8, 1999, p. 35. 92 Peter Viles and Jack Cafferty, “Goldman Sachs' IPO,” CNNfn, May 4, 1999.

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