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Thursday, 26 May 2011

At which point does it become a bad move to work for Goldman Sachs?

Sarah Butcher

If you’re alert to the media, you will be aware that Goldman Sachs is not getting a good press.

First, there was a recent article blaming it for the food crisis. And then there was another article by the Rolling Stone journalist Matt Taibbi who first concocted the ‘Vampire Squid’ moniker, calling for criminal charges to be brought against Goldman Sachs. More recently, there’s been something accusing it of involvement in ’death derivatives’ and then the Financial Times cites Carl Levin, chairman of the Senate investigative subcommittee, as saying there’s “real hope” law enforcement authorities will act on his panel’s report accusing Goldman Sachs of misleading investors and Congress.

All of this has been seized upon by the public at large. On Twitter, Goldman is regularly vilified as the source of much that’s wrong in the world.

Does any of this matter if you intend to join Goldman Sachs as an employee?

It's inadvisable if…

1) You care about the share price and think it will fall further

This year, Goldman allegedly paid around 80% of its UK bonuses in cash – even for its MDs. However, it also hands out restricted stock, particularly to senior staff and executives.

US analyst Dick Bove thinks Goldman’s stock will keep falling as pressure to bring claims against the firm increases. It’s currently down 11% on January. This is bad news if the stock component of compensation is important to you but not if you’re on a high salary and are being paid cash.

2) You want to be seen to be doing good

Generation Y allegedly want to give back to society in their careers. Goldman Sachs does allow for this: its website extols its community teamworks programme, it promotes entrepreneurialism among women in developing countries, and has helped create a 735,000 acre nature reserve in Chile.

Despite this, if you work at Goldman you will probably need to engage in arduous discussions if you want to argue the firm’s good intentions.

More common than praise for the firm’s environmental stewardship is this kind of comment from Twitter:

“A girlfriend just boasted about reaching a senior position at Goldman Sachs. I don’t know she can think that’s a good thing.”

3) You think Goldman’s wider reputation will impact its ability to do business

Earlier this year, it looked like reputational issues could possibly be taking their toll as Goldman slipped to 10th in US M&A rankings. As of today, however, it’s back to the top position globally.

Less promisingly, the firm appears to be losing market share in fixed income and equities trading, where revenues were down 28% and 7% respectively year on year in the first quarter, versus smaller declines at the likes of JPMorgan and Deutsche.

However, Goldman has argued that some revenue redistribution is inevitable given the abnormal conditions of Q10. And markets revenues declined more precipitously still at Citigroup and BAML.

4) You are extremely paranoid

Could public dislike of Goldman spill over from the internet?

There were unconfirmed suggestions last year that Goldman bankers had been advised not to gather in large groups in public. In 2009 it was suggested that Lloyd Blankfein had advised employees not to engage in conspicuous consumption and there was a spurious report that some US employees had begun carrying guns.

It's advisable if…

1) You want to get paid

Goldman pays the most, period. There are unconfirmed rumours of a very few partners in London on salaries of £1m. No competing bank comes close.

In the first quarter this year, compensation accrued per head was $148k, versus $124k at JPMorgan, $121k at UBS and $133k at Credit Suisse.

“Recruitment at Goldman Sachs is ultimately driven by the idea that if you want to earn the most and you’re any good, you’ll choose to work for Goldman,” says one recent former senior employee. “Some partners have had their base comp trebled in the past few years,” he adds.

2) You want to join a leading multinational firm out of university and to develop your career there

Goldman Sachs relies upon growing its own.

“It’s all about hiring people out of university and growing them gradually,” says the former employee. “Lateral hiring, does happen but rarely.”

Goldman recruiters reportedly pay a lot of attention to the results to the Universum survey, which shows where students want to work. This year it came 10th in the UK, below Apple, Google, HSBC, PWC, KPMG, the BBC, Microsoft, JPMorgan and the Bank of England.

“As long as they can attract the brightest 3% of smart you things who are that driven that they want to work there, or that interested in the money, they can probably ignore the bad press,” the ex-employee adds.

3) You want to work for one of the best

Goldman is still one of the top banks in most of the markets it operates in. In the first quarter, its fixed income revenues were exceeded by both JPMorgan and Deutsche and JPMorgan beat it in M&A and DCM, but all other rivals lagged behind.

4) You really don’t care what anyone else thinks

Headhunters say most candidates are impervious to the bad press.

“It’s still the call, the one,” says the managing director of one search boutique with links to Goldman. “This is all more press than reality.”

“What matters at Goldman Sachs is executing, delivering to clients and making money. That is the attractor of staff and that’s what they believe in,” alleges the ex-employee. “What happens on social media is just a lot of chit chat.”

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