|
Goldman Sachs CEO Hank Paulson |
Perhaps he’d had a bad night’s sleep. Perhaps it was a slip of the tongue. Or perhaps the man who told us last June that we needed to buck up our standards in the wake of the corporate crises in the US simply wanted to tell the truth.
Whatever the reason, Goldman Sachs CEO Hank Paulson found himself saying in public what many have only ever said in private: that most employees at investment banks are purely bit-part players.
Paulson had the 8.15am slot at the Salomon Smith Barney financial services conference in New York, and was facing the end of his 22 minutes of questions following on from his 17-minute prepared speech when he was asked how to build for the future. “What you find in our business, and I really don’t want to sound heartless, I just want to tell you the facts. What you find is that 15% to 20% of the people add 80% of the value. The traders with the risk experience, the people who do the deals, the people who bring the big clients in.”
Presumably Paulson is one of the 15 to 20%, though shareholders might ask him why he’s still employing the other 80% of staff who are such wasters.
And for them, it’s surely not an encouraging sentiment to hear from the CEO of a firm that always used to discourage any notion of a star culture.
Still, there might be room for one or two of these lesser people to step forward. Some senior Goldman bankers with experience enough to bring in clients and do big deals have recently left, such as David Baum, head of US investment banking. And on the very day Paulson was telling investors about his 20% rule, another one of them was defecting to a rival. Alex Ehrlich, the head of prime brokerage at Goldman Sachs for Europe and Asia, left to join UBS Warburg. He’d been at Goldman for 20 years, and ran one of the very businesses that Paulson touted in his SSB presentation as a revenue saviour during the downturn. But it apparently wasn’t important enough of a business to warrant making Ehrlich a partner. So was he one of the 20% or the 80%?
Goldman’s press office would far rather we didn’t even mention the whole thing.
