Goldman partners’ reduced

By Greg Farrell in New York

Published: October 29 2008 20:37 | Last updated: October 29 2008 20:37

Goldman Sachs unveiled its new class of 94 partners, proving that even in the most tumultuous times on Wall Street, the company’s biannual ritual of bringing up-and-comers to its innermost circle would continue.

The class will join Goldman’s elite at a time when a partnership at the firm is no longer a guarantee of a multi-million payday. By the end of this year, the bank’s 349 partners stand to divvy up the smallest bonus pool that Goldman has produced, on a per capita basis, since going public in 1999.

While Goldman was willing to confirm the announcement of the partners, it would not comment on the other biannual tradition that goes hand-in-hand with the process: the “de-partnering” of a comparable number of its partner-managing directors.

The bank tries to keep the number of partners at about 1 per cent of employees.

At the end of the third quarter, the firm had 349 partners and 32,600 employees worldwide. With plans to lay off some 10 per cent of its workforce, Goldman will probably try to hold its number of partners at its current level, or shrink it slightly.

That means that with the addition of 94 names in December, the new total of 443 partners will have to be reduced, through attrition and the removal of the designation of “partner” from close to 100 members of the inner circle.

Charles Ellis, author of The Partnership, The Making of Goldman Sachs, likens the culling process to a Darwinian exercise. “It’s entirely rational, ruthless and unemotional,” he says. “There’s no softness and no sentiment to it. The firm just gets the best people and empowers them. Some people react badly to that, but it’s survival of the fittest.”

In many ways, Ellis says, Goldman’s focus on recruiting the best people, promoting them and pushing them ever harder, is what separates it from its rivals. “At most places, once you become a partner, you have tenure,” he says. “You’re a superstar. At Goldman Sachs, that’s not it. You’re expected to accelerate.”

For the first three quarters of 2008, Goldman has reported profits of $4.4bn, down by almost half from last year’s sum. According to SEC filings, it has set aside $11.4bn for pay and benefits, (from the bailout money) a decline of 32 per cent over 2007. Barring a big change in the firm’s performance, the current partners can expect bonuses, on the average, of $1m or less, according to people familiar with the matter.