Abby Becomes Partner at Goldman
"With Stock Issue Ahead, Goldman, Sachs Names 57 as Partners"
By JOSEPH KAHN -- October 21, 1998
NEW YORK -- Goldman, Sachs & Co. named 57 new
partners Tuesday, awarding them an ownership stake
in
the world's most profitable private partnership with
the promise of a lucrative public offering down the
road.
Among those named was Abby Joseph Cohen, Goldman's
chief portfolio strategist. Ms. Cohen's positive
predictions about the stock market made her a Wall
Street superstar in the 1990s, but her reputation
suffered after the sharp summer selloff that raised the
specter of a bear market.
The Wall Street firm will add the 57 to its current
roster of 189 partners. But 20 to 25 existing partners
are expected to retire -- or become limited in
Goldman's parlance -- before the firm's fiscal year
ends on Nov. 28. Some of those people will retire
voluntarily, executives of the firm said, while others
will be pushed out to make way for the younger
recruits.
Being named a partner of Goldman, Sachs is one of the
richest rewards on Wall Street, with partners earning
an average of more than $1 million a year as well as
building equity stakes in one of the world's most
profitable financial companies.
For the most senior partners, that stake is valued in
the hundreds of millions of dollars.
This year's crop of partners will also benefit greatly
if Goldman follows through with its plan to issue
shares to the public for the first time in its 130-year
history. Partners voted to take the firm public earlier
this year, a move that would have ended the partnership
and denied that status to the people offered
partnerships Tuesday. But the firm delayed the sale of
shares indefinitely last month because of turmoil in
the markets and weaker-than-expected operating profits
for Goldman and other financial companies, and it
quickly revived the traditional partnership selection
process.
Goldman, Sachs names partners only every other year,
and the newest group could well be the last before
Goldman does issue shares. At that time, even the most
junior ones, including those named Tuesday, would have
stakes valued in the tens of millions.
To be sure, the economics of going public is not what
it was a few months ago. Even with the recent rebound
in financial-company share prices, Goldman's Wall
Street peers have seen their valuations cut in half
from July peaks, meaning that Goldman shares, if issued
Wednesday or in the near future, would be unlikely to
command the high prices once envisioned.
Moreover, Goldman's partners, even after subtracting
for expected retirements, would number perhaps 220,
meaning that each one would have a smaller slice of the
equity than the 189 would have.
Less fortunate are the partners expected to retire. As
limited partners, they sacrifice their equity stakes in
the firm, though they have the option of investing in
Goldman, Sachs and earning what is often a hefty annual
return on their capital. Limited partners are expected
to receive a share of the profits if Goldman goes
public, but their potential gain will be much smaller
than that of the general partners.
"I am sure that with the prospect of an IPO just around
the corner, there are some in that batch of retired
partners who are not too happy about it," a current
limited partner said. "But I am sure there are others
who just thought this was the time. You can't wait
forever, and being a Goldman partner is an extremely
demanding job."
Among those expected to retire this year are William J.
Buckley and Richard M. Hayden, partners in the equities
division, and Christopher Flowers of the financial
institutions group. Flowers, who helped prepare
Goldman's plan to issue shares earlier this year and is
one of the most senior partners, announced his
retirement recently after he failed to win one of the
top spots in the firm's revamped executive hierarchy.
Ms. Cohen is the best known among the 57 new partners,
who will collect their brass rings if they accept
Goldman's invitation next month. Two other women were
also named partners, bringing the total at the firm to
17. Goldman has been criticized in the past for having
few women partners.....
Copyright 1998 The New York Times Company
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