From the monthly archives:

April 2011

The rumors as to who will succeed Lloyd Blankfein in what is arguably the #1 investment banking job in the world, CEO of Goldman Sachs, have begun to swirl.

Blankfein is reportedly exhausted after leading Goldman through the financial crisis and more recently, through battles with Congress over new regulations governing the industry, according to an article in the Sydney Morning Herald.

Given the size and scope of Goldman’s business, the next choice of CEO could change the firm’s direction and influence decision makers around the world. Even after the bruising from a lawsuit by the SEC last year over questionable disclosure practices, Goldman remains the world’s most powerful investment bank. Its alumni, especially former chairmen, have gone on to take influential positions with many governments. This includes Robert Rubin and Henry Paulson, who went on to become U.S. Secretaries of the Treasury, Jon Corzine, who later became senator for New Jersey, and then governor of the state. Current Bank of Canada head Mark Carney is also a Goldman alum.

A look at the leading candidates to succeed Blankfein reveals that they come from trading backgrounds, as well. Each is a study in achievement.

British-born Michael Sherwood overseas the firm’s international business from his London office. Sherwood has deep knowledge of the fixed income and equities sectors, an area where Goldman makes the most money. However, Sherwood reportedly pushed Goldman into a 2008 deal with a petrochemical company that lost money, a black mark against his record.

Michael Evans, a Canadian and former Olympic gold medal winner in rowing, chairs Goldman’s Asian business. However, some Asian clients are reported to be angry at Evans because his division sold them structured financed investments which later performed poorly.

Gary Cohn is currently Goldman’s president and chief operating officer, and Blankfein’s top deputy in New York. Cohn, 50, joined the firm as a precious metals trader and made his mark over a decade ago by turning around Goldman’s trading operations and mortgage business. He has worked closely with Blankfein since 1990.

There’s no clear favorite at this point but insiders say it’s unlikely that Goldman will venture outside the firm for a successor, if and when Blankfein does step down.

What’s your take? What sort of background does the top dog at Goldman, or any other investment banking leader, require these days? Add your comments below.

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Josh Birnbaum was a star trader at Goldman Sachs and engineered the firm’s $3.7 billion short against the subprime market, just before the whole market blew up. The trade saved Goldman barrels of money and Birnbaum assumed that he should be properly rewarded for his efforts in his investment banking job.

In his self-review, which Goldman investment bankers fill out to present their best case for a big bonus, Birnbaum reportedly wrote: “My performance in 2007 has been my best ever by any objective means.” He also noted that the shorts were not a hedge, but a directional bet, and further example of his trading prowess.
 
Thanks to William Cohan’s new expose on Goldman, Money and Power, we now know that Birnbaum received a $10 million bonus for his efforts. But he wasn’t made partner. That, plus the paltry bonus, made Birnbaum quit the investment banking firm for greener pastures.

Is a $10 billion fair for a $3.7 billion winning trade? “I guess it depends on your perspective of what’s fair, right?” Birnbaum said in an interview for the book. “If you’re a steelworker, you probably think I got paid pretty well. If you’re a hedge fund manager, you probably don’t.” Not surprisingly, Birnbaum’s new job is with a hedge fund firm.

The book itself takes an in-depth look at Goldman’s recent history and the damage done to its reputation by its dealings during the financial crisis. Goldman’s big short bet on subprime helped it whittle down its mortgage exposure. But the fact that it was actively selling CDOs while betting against the market has tarnished the firm’s perceived integrity. In addition, its practice of exploiting information gleaned from client activities resulted in being charged with securities fraud by the SEC and paying a $550 million penalty to settle the matter.

The investment banking firm that has emerged from the crash does not appear to be quite so impregnable or impressive, notes John Gapper of the Financial Times. Nevertheless, Goldman still has an innate ability to focus on the biggest, most important, most lucrative deals … “whale hunting” versus fishing, notes the Times.

Your thoughts? Think Birnbaum was justified at jumping ship and seeking even greater fortunes in the hedge fund world? Add your comments below.

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We all tend to share job woes with spouses and partners. But deciding what can and cannot (or should not) be shared could be critical for your investment banking job.

So says career coach Sonal Agrawal in a Livemint article. She cites one candidate she successfully placed in a new job. His wife, whom he met in business school, worked for a rival company. He disclosed it openly in his job interviews and it wasn’t an issue. But then his new boss called his wife’s boss at the other company and demanded a detailed reference check on the wife. There was hell to pay, at both the office and home.

An increasing number of power couples meet in business school and work in the same industry, say Agrawal. Company policies are all over the map, and there’s very little guidance for senior executives for managing the delicate nature of sensitive information. In investment banking jobs, where a win for one company could result in a loss for another, it can be “minefield.”

In this particular candidate’s case, he did the right thing. He flagged the potential conflict right away in his interview. That was the time the hiring company should have checked out any concerns they had, before extending the job offer to him. They could have discretely called in a consultant to conduct background checks as well. The candidate’s wife could have informed her employer that her spouse was considering joining a competitive firm, rather than risk having her boss find out from the competing company. And those working for recruiting firms could have (and should have) checked out these issue as part of the recruiting process.

The whole point is that job candidates need to recognize that these issues have to be brought up in advance, however hesitant you may be. Otherwise they can blow up in your face after a job offer has been extended.

What’s more, says Agrawal, power couples have to set some clear ground rules at home. While some general talk about business is expected, it should be clear ahead of time that certain topics are off-limits. Simple housekeeping such as not leaving confidential papers or laptops lying around and being discreet when on conference calls is another rule.

“Of course, a cohabiting competitor needs to display understanding when the partner can’t share details of what’s happening at work,” writes Agrawal. “Equally important is knowing when and how to step away from a discussion or project at the workplace, if one feels that the conflict is not manageable—or even taking the mutual decision for one spouse to remove oneself from a long-term job conflict situation.”

What about you? Have you ever been involved with someone in the same profession and ran into potentially sensitive issues or conflicts of interest? Add your comments below.

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Grads Still Seek Investment Banking Job Training

April 4, 2011

Demand for entry-level investment banking jobs is as strong as ever, despite the hammering the industry has taken in the press and popular documentaries, says the Australian. Applications for top bank graduate training programs are “definitely on track to being at least on par or increased on last year,” says Elaina Griffiths, head of Campus Recruitment […]

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