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October 13, 2006

The Partnership Lottery at Goldman Sachs

posted by MR WAVETHEORY at 10/13/2006 01:44:00 AM
Great article about the partnership lottery at Goldman Sachs (NYSE GS). Every year 300 people compete for a shot to take home a $7 million bonus/salary. Below are the juicy bits.

"The $7 million lottery. 25% Chance to win."
Goldman will announce on Oct. 25 its new class of partners, who will join the 287 who currently hold that title. Last year, that group shared more than $2 billion, or about 20% of the total compensation Goldman paid to its more than 25,000 employees world-wide, according to people familiar with the matter. That averages out to about $7 million per partner.

"Getting Graded - A, B, Cs"
Candidates were divided by letter grade into three categories -- A's, B's and C's. The C's were the long shots. "I can tell you that for anyone who is a B or a C in this process, it's the first time in their lives they've ever been ranked that," says Gary Cohn, Goldman's co-president, who oversees the process.

"We are still mostly male."
The firm won't discuss this year's candidates or comment on partner compensation. In 2004, 237 people were nominated, 174 were vetted by partners, and just 99 were selected, including only 14 women.

"We have alot of time on our hands."
Successful partner candidates are expected to be "culture carriers," he says. The firm encourages public service by partners, he says, and many partners have pursued that path, including former Chief Executive Officer Henry Paulson Jr., who is now Treasury Secretary. "Sure, Goldman partners make a lot," Mr. Blankfein says. "But I can pay people a lot of money without going through this process."

"The consolation price is MD Light."
At other Wall Street firms, executives typically aspire to become managing directors, a title that often comes with perks ranging from the right to buy firm stock at a discount to membership at the corporate gym. Goldman has 950 managing directors, who are referred to internally as "MD light," because that position is viewed as a stepping stone to becoming a partner, or PMD. Goldman Co-President Jon Winkelried, who oversees the selection process with Mr. Cohn, says making partner is viewed as the real beginning of a career at the firm.

"The game is like survivor."
In the mid-1990s, then senior partners Stephen Friedman and Robert Rubin, who have since joined other companies, developed a system to vet candidates. They dubbed the process "cross-ruffing," a reference to a complex bridge maneuver. At Goldman, it is the process by which partners review candidates from other departments. Investment-banking partners, for example, will review candidates from asset management.

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