The Story of Goldman Sachs

In 1986, the investment bank Goldman Sachs was a $38 billion business owned by more than 100 active and retired partners.

While the partnership structure had insulated the company from the vicissitudes of the stock market and given the company a strong culture of teamwork, it had some significant disadvantages, particularly an unstable capital base and an inability to grow by making acquisitions with stock.

Because of these factors, the firm’s nine-person management committee recommended that Goldman Sachs become a corporation and sell its shares to the public.

Over a weekend in December 1986, all the partners met to consider the new vision.

• Rather than presenting a fait accompli, Goldman’s leadership stayed faithful to the firm’s ingrained teamwork culture during the two-day retreat. The partners debated the proposal at length and with high emotion, but the meeting ended with no decision. Goldman Sachs remained a partnership.

Ten years later, the partners once again considered the proposal to make Goldman Sachs a publicly traded corporation.

• This time, a special committee prepared an exhaustively detailed proposal for an IPO, and the firm leaders actively lobbied partners to support it. Once again, a weekend partnership meeting was held to consider the firm’s future. It became clear to the executive committee that the partners did not want to sell the firm, so the IPO proposal was withdrawn.

In 1998, the firm’s leadership established a subcommittee to set strategy in a rapidly changing global financial environment.

Ultimately, the committee recommended a five-year program of aggressive growth that included going public, and the firm’s two co-chairmen then engaged in one-on-one conversations with nearly all the firm’s 190 partners to persuade them to accept the recommendation.

Then in June 1998, the partners convened for yet another weekend retreat. This time, they voted to sell the firm’s shares to the public. After 12 years of talks, the firm’s leadership finally succeeded in negotiating a multilateral vision to carry Goldman Sachs into the 21st century.

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