Goldman Sachs Celebrates 25 Years as a Public Company

The leading global investment banking, securities and investment management firm, Goldman Sachs celebrated 25 years as a public company in May 2024. The Wall Street investment bank went public on 4 May 1999, in what was the second-largest initial public offering (IPO) in the history of US finance at the time. In this article we will have a quick look at its history, its opaque structure and lack of accountability, as well as more details on its three CEOs as a public company.

History of Goldman Sachs

In 1869, Marcus Goldman, a German immigrant, opened a small office in Lower Manhattan, which eventually evolved into the commercial paper business by purchasing and selling merchants’ promissory notes. Being both joined by his son-in-law Samuel Sachs in 1882 and his son Henry Goldman in 1885, the company changed its name to Goldman, Sachs & Co.

From 1896 the firm went on to become the leader in commercial paper sales and expanded nationally with offices in Boston, Chicago, San Francisco, Philadelphia, and St. Louis.

Establishing European financial relationships in 1897, Goldman Sachs broadened its services to include foreign exchange and letters of credit. With clients who pursued long-term capital during the early 1900s, the firm forayed into investment banking, incorporating the novel practices of securities valuation.

Sidney J. Weinberg’s ascent to senior partner in 1930 led the firm through the Great Depression, emerging as a full-service investment bank by the mid-20th century.

Sidney Weinberg and Gus Levy (senior Partner who died in 1976) reinforced the company’s financing and equity trading competencies, creating new recipes like block trading. By means of successive acquisitions and leadership changes, Goldman Sachs successfully established a foothold abroad, including Asia and Europe.

As a result of the firm’s endeavour to remain innovative in technology, philanthropy, and sustainability in finance, it has grown to become a financial leader with a culture of client service, partnership and integrity at its core.

Seminal moment: Goldman Sach’s IPO

The first few years after the initial public offering, longtime chief financial officer David Viniar was widely reported to have said in private that “disclosing the weather is too much information”.

Goldman’s IPO in May 1999 was a turning point for the then 130-year-old investment bank.

The company planned to celebrate the event by recreating the New York Stock exchange balcony where then-chief executive Hank Paulson rang the opening bell, so employees could take their own picture.

At the time, the necessity of permanent capital made it inevitable for the bank to go public, Lloyd Blankfein, explained. Blankfein was the second of the three chief executives of the bank since its IPO, and a partner before the float. He explained that they were afraid that they would lose their unique partner culture that had been the reason for the firm’s success. As he noted, that culture has largely survived, and still influences the way people conduct themselves and meet their responsibilities. However, being a partner in Goldman Sachs in 2024 is no longer the same as it used to be.

Lack of disclosure and accountability

Goldman’s bankers have sometimes found it hard to deal with the change in accountability to the outside shareholders. As reported in the Financial Times, Paulson and Blankfein, the chief executives, would not talk on the earnings calls, while the bank did not set regular public financial targets.

According to insiders, Goldman’s level of disclosure at the time was not however the worst compared to peers such as Bear Stearns or Lehman Brothers, both of which failed in the financial crisis. Nevertheless, their disclosures were behind their peers for a long time, many years even after the IPO, according to Jason Goldberg, a research analyst at Barclays.

How did the Goldman Sachs make its money?

For its first ten years Goldman Sachs as a public company, gave investors incredible profits from its money-making investment banking and trading businesses. The profits tripled from 2000 to 2007. It is the only institution among the big six US banks that has outperformed the S&P 500 over the past 25 years.

The start of its second decade as a public company, in the depths of the 2008 global financial crisis, was not as impressive as the first one and this time it came under a much harsher regulatory spotlight as it changed from a brokerage firm to a bank holding company.

When David Solomon became the chief executive in 2018, his mandate was to make Goldman function more like a public company even though it had been public for two decades already.

The bank is now focused on growing its asset and wealth management franchise. But Goldman continues to make its money today from investment banking, trading and managing money for the rich.

Stock pricing

The bank conducted its own IPO in the same way it has done for its clients in the years after. It placed the shares at the right price, at the top of its target range, but still low enough to let them rise more than 30 per cent on the first day of trading on the New York Stock Exchange on 4 May.

شركاء

Goldman Sachs still gives the title of partner to its 400-odd most senior employees, with a new class being formed every two years. Nevertheless, after 25 years, only 19 per cent of its partners are women, which is an increase from the 6 per cent at the time of the IPO.

Solomon explained that they have worked very hard to make sure that being a partner is aspirational and that partners continue to contribute to the firm’s culture of excellence.

Today’s perks for the new partners are special access to funds managed by Goldman, a guaranteed salary of $1mn, plus a bonus, an annual private gathering, and funds to donate to charity through the bank’s philanthropic arm.

Goldman’s chief executives as a public company

Hank Paulson started his career at Goldman in 1974 after having worked in Washington at the Department of Defence and in the Nixon administration. A banker, he was one of the first to advise Goldman to expand its presence in China. He was appointed co-CEO with Jon Corzine in 1998 and left Goldman in 2006 to become the Treasury secretary under George W Bush.

Another notable CEO was Paulson’s successor Lloyd Blankfein. He was a partner in 1988 and president in 2003. He was elected as the chief executive in 2006 and was praised by his colleagues for his defence of Goldman from public criticism.

David M. Solomon went to Goldman in 1999 as a partner to help in the management of the firm’s leveraged finance business. He later co-ran investment banking and in 2017 he became co-president together with Harvey Schwartz in what was seen as a two-way battle to succeed Blankfein. He is the current CEO of Goldman Sachs. Solomon’s DJ performances in nightclubs and music festivals around New York, Miami, and The Bahamas have been rather controversial, but he has been praised for making the bank a more shareholder-friendly company with more durable earnings.

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