Corporate Reputation and Competitiveness

MSc in Business Administration

Goldman Sachs CASE STUDY

Goldman Sachs Structure

- Business Overview - Issue identification - Recovery measures - Recommended strategy - Implementation

Business Overview

 Goldman Sachss Business Overview

Founded Headquarters Key people
[1] [1]

1869 200 West Street, New York, U.S. Lloyd C. Blankfein (Chairman & CEO) US$ 41.664 billion US$ 11.207 billion US$ 7.475 billion US$ 938.55 billion US$ 75.716 billion 32,600

Revenue

Op. income Net income Total assets

[1]

[1]

Total equity Employees

[1]

[1]

 Goldman Sachss dimension of culture

Source: Goffee & Jones (1996), Harvard Business School Publishing

The Financial crisis of 2008

The financial crisis of 2008

Explanations

Defining Mortgagebacked securities

Defining Credit Defaults Swaps (CDS)

The Collapse and bailout of AIG Abacus AC1 Timberwolf Facebook

Mortgage-backed securities

Credit Default Swaps (CDS)

 The Collapse and bailout of AIG

 The Collapse and bailout of AIG

 In 2007
Concerns about

Goldman starts to demand additional collateral to cover counterparty risk Other banks followed

 The Collapse and bailout of AIG

Mortgage-backed securities

TARP funds

 Abacus AC1

1st decade of the twenty-first century

ABACUS ABACUS ABACUS

ask

Synthetic CDO It would fall in value

 SEC and Abacus AC1

 SEC and Abacus AC1

 SEC and Abacus AC1

 Timberwolf I The Shi**y deal

 Facebook
Special Rules for >500 Shareholders

Needed to raise funds Only wanted to do IPO in 2012

$450 million
Private investment

Means >500 shareholders

500 shareholders

Issue Identification

Goldman Sachs

Issue identification

Success

Increase in reputation

Source: Based on Fombrun & van Riel (2004

Recovery measures by G.S.

 Recovery measures
Business Standards Committee
Conducts interviews recommendations The report of 2011: Focus on long term interest with clients and issue report with

put client interests at the center of the decision-making process

recommended reorganizing the firms business segments into four classes in order to provide greater transparency.

 Recovery measures
Event Review Group
Was established to review incidents and to manage reputation risks

 Recovery measures
Say-to-pay
Goldman faced the criticism that the compensation of their bankers was very high and the salary of employees was very low. So the bankers may focus on short term profits. Solution: Give shareholders a nonbinding vote on executive compensation.

Corporate Reputation and Competitiveness - Professor Rui Vinhas da Silva

SWOT Analysis

SWOT ANALYSIS

Strengths

Strong investment banking operations Strong brand Overcame financial crisis Innovative Work Culture Geographically present across various countries Government Support

SWOT ANALYSIS
Legal issues
Negative publicity

Weaknesses

High Attrition Rates

Blotted Public Image (Subprime Mortgage Fraud) Low perception of Social Responsibility

SWOT ANALYSIS
Opportunities for cross selling

Opportunities

Emerging markets in need of funding

Consolidating markets acquisition targets

Bailout money

Fix Capital requirements

Acquire small companies

Reduced competition due to economic slowdown and competitors bankruptcy

SWOT ANALYSIS
Credit market crisis

Threats

Mortgage issues
Sharp rise in interest rates

Cyclical industry
Government intervention Conflicts of interest

Recommended Strategy

 Reputation Repair Strategy

Keyword: Communication

 Four tasks of corporate communication

Source: Adapted from van Woerkum & Aarts (2008).

 Stabilise the environment

Rescue: Crises management strategy

First 24 hours of a crises plan

How to show leadership Actions for recovery How to respond How to monitor media How to communicate widely and consistently

Create crises communication plan

Quickly and accurately addressing existing issues Preventing an issue from escalating to a crises Minimize the long-term impact of a crises Determine response

 Meeting Stakeholders Expectations

Restore: Stakeholders perception

REPUTATION

 How to restore a positive image ?

Recover: Take action!

- work with legislators and regulators - Use Goldman Sachss enormous on eliminating risky and unsafe financial might to create jobs. investment ventures. - Involve in investment ventures to - limit any further connections create employment opportunities, between Goldman and AIG redouble its efforts and create massive investment funds that - help Us government creates a new would launch small business, seed structure which allows open and start-ups, get more involved in the flexible markets but also safeguards green movement, increase the American public so it never philanthropic giving to education suffers through another crisis. and showcase its positive work.

 Implementation plan
Steps
Rescue
Conduct a crises plan Create a crises communication plan Measure stakeholders expectations and damage

When
As soon as possible

Who
Crises management team , CEO

Restore

Recover

Create an action plan Monitor and evaluate progress

Thank you..

Questions ?