Business Book Of The Week: Goldman's recipe for success

Goldman Sachs: The Culture of Success

by Lisa Endlich

(Little Brown, pounds 20)

AUTHORISED CORPORATE biographies are generally taken to be a clear "sell" signal for the underlying business. The book by Lisa Endlich, while not authorised, is clearly not unauthorised either. Both past and present partners of Goldman have co-operated, no doubt considering Endlich, a former vice president at the firm, as a safe pair of hands.

As one might expect in these circumstances, it is difficult for the author to address the firm on an equal footing. She seems a little in awe of the current leadership - triumphs (of which there are quite a lot) are lauded, whilst problems (of which there are a few) are dealt with sympathetically.

In fairness to Endlich, it must be said that Goldman is a very good firm with very good people. It is difficult to find anything negative to say about many of those who have led the firm in the past, people such as John Weinberg, John Whitehead and Bob Rubin. There is reference to a personality clash among the partnership during the First World War, when Henry Goldman, supported the German side against the views of most of his partners. But the book is short on any personality clashes in more recent times, which is good for Goldman, but means the book lacks some of the conflict that marks the classic books on investment banking such as Barbarians at the Gate or Liar's Poker.

Also to Endlich's credit, whilst the difficult times may be dealt with sympathetically, she does not seek to gloss over them in a few short paragraphs. Goldman's relationship with Maxwell and the substantial dealings carried out by Eric Sheinberg, a senior partner, on his behalf are dealt with at some length. Similarly the book details the dealings of Robert Freeman, the partner who pleaded guilty to insider trading and spent time in jail.

Two themes of Goldman's culture are accurately caught by the book. The first is the importance of the partnership structure that allowed Goldman to get through some of the more difficult moments in its history, where other firms might well have faltered for longer. The second is the identification and promotion from within of succeeding generations of able leaders, earning their place through merit and the support of their partners. One of the characteristics of Goldman's leadership has been the regular choice of two partners to run the firm: John Whitehead and John Weinberg; Steve Friedman and Bob Rubin, and Jon Corzine and Hank Paulson. This has allowed the firm to pull together the often conflicting arms of the trading and corporate finance areas of the business. But Endlich does not speculate on whether this type of joint leadership is something which, while possible within a partnership, is more difficult to achieve in a company with public status, where outside investors want to know who is running the shop. It is noteworthy that in recent years the one really successful joint leadership of a City firm has been at Cazenoves (John Kemp-Welch and Anthony Forbes) which was also achieved in a partnership structure.

Of interest to British readers is the description of the growth of the London business and Goldman's increasing reputation in UK and Continental European markets. Endlich ascribes much of this to the import of US expertise in Mergers and Acquisitions in the mid-1980s. She writes that "the British merchant banks did not have separate M&A specialists, and the early deals had all the hallmarks of amateurs". This is a surprising conclusion for anyone who witnessed at the time the sophisticated deals run by specialists such as George Magan; or, for those with longer memories, the formidable reputation Charles Ball had built by the early 1970s as a defender of companies, long before Wall Street had specialist M&A departments. The growing importance of the US investment banks owed much more to the sheer importance of the US markets, both as a source of funding and as a pool of potential "white knights"; and also to the leadership the US houses held over their UK counterparts in the distribution of securities and block trading skills, an area of excellence at Goldman dating back to the time that Gus Levy was senior partner.

The book reaches its conclusion in late 1998, the decision having been taken to go public but postponed after the market disruption of the autumn. It needs a postscript to take it through to the public offering in April 1999; and it needs to be revisited in 10 years' time to see whether Goldman, shorn of the one thing which clearly distinguished it from its competitors, can be as good a firm as a public company as it has been as a partnership.

David Clementi is deputy governor of the Bank of England

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test