Goldman Sachs Releases the Business Standards Committee Impact Report
NEW YORK--(BUSINESS WIRE)-- The Goldman Sachs Group, Inc. (NYS: GS) today announced the publication of the Business Standards Committee (BSC) Impact Report, which discusses the changes the firm made as a result of the BSC and their impact.
In May 2010, we announced the creation of the Business Standards Committee to conduct an extensive review of our business standards and practices. In January 2011, we published the report of the BSC, which made 39 recommendations for change, spanning client service, conflicts and business selection, committee governance, training and professional development and employee evaluation and incentives. In February this year, we completed the full implementation of each of the recommendations.
This three-year effort is the most extensive review of the firm's business standards and practices in the firm's 147-year history.
"The work underlying the BSC is part of a much larger, ongoing commitment to be open to change and to learn the right lessons from recent experiences," said Lloyd C. Blankfein, Chairman and CEO. "We believe that these attributes of our culture provide the foundation on which to sustain the spirit and the impact of the changes we have made in order to meet the long-term needs of our clients and continually improve as a financial institution."
We identified three unifying themes across the 39 BSC recommendations which capture the elements of greatest change and impact on the firm: A higher standard of client care, greater sensitivity and awareness of reputational risk and a deeper commitment to individual and collective accountability.
A Higher Standard of Client Care
We have elevated the standard of client care in our business. In addition to a renewed focus on client service, long-term client relationships and communication with our clients, we require greater individual accountability for clients and their interests.
- We established the Firmwide Client and Business Standards Committee and changed our committee governance structure and committee missions to ensure that clients are at the very center of our decision-making.
- Revenue divisions and regions within the firm established a divisional or regional Client and Business Standards Committee, respectively, and undertook important steps to better facilitate communication with our clients about our different roles and responsibilities.
- We enhanced our suitability framework to help us better assess whether our clients have the background, experience and capacity to understand the range of outcomes from transactions they execute with us, particularly those transactions that are strategic or complex.
- We increased the emphasis on individual accountability for clients in our annual employee performance review process and, for senior client relationship professionals, in compensation determinations.
Greater Reputational Sensitivity and Awareness
We now have a more systematic, integrated and comprehensive firmwide framework for reputational risk monitoring and management.
- Our major transaction review committees, including the newly created Firmwide Suitability Committee and Firmwide New Activity Committee, are applying more thorough and comprehensive standards for transaction approvals, particularly for those transactions that present reputational risk.
- We developed a consistent framework ofdisclosure, documentation and control standards for underwriting activities, private placements and other origination activities.
- We strengthened our business standards through a substantially modified set of conflicts procedures.
- We introduced new pre-transaction sales practices to ensure heightened due diligence and disclosure before a transaction is executed.
- We developed the capability to analyze the performance of our clients' derivatives transactions, enabling our client relationship professionals and their managers to engage with clients as appropriate about the performance of these transactions.
- We changed our annual employee performance review and rewards processes to include an assessment of reputational excellence, linking "cultural" behavior to how our people are recognized and rewarded.
A Deeper Commitment to Individual and Collective Accountability
Through the significant BSC training and professional development effort, we have engaged our employees at all levels on the importance of individual accountability as well as on our shared responsibility for our clients and for protecting the firm's reputation.
- Our Chairman and CEO communicated a direct message to our senior leaders and all employees about the requirement for a deeper commitment to individual and collective accountability. The Chairman's Forum comprised 23, three-hour sessions with Lloyd and groups of our partners and managing directors. It featured a case study and intensive discussion focused on how we conduct ourselves in serving our clients and protecting the firm's reputation, especially during a stressed market environment.
- We assess reputational excellence as part of our annual performance review process. Beginning in 2011, reviewers of all professionals were asked to rate reviewees on reputational excellence based on prescribed criteria.
- As part of the performance review process, reviewers are asked to rate the reviewee with regard to his or her focus on trust, transparency and long-term orientation in connection with client relationships
- We strengthened our Code of Business Conduct and Ethics and made changes to our employee review process that reinforce the importance that the firm is placing on individual and collective accountability.
Defining the Impact of the BSC
The impact of these and other changes discussed in the report means that for all our employees the experience of initiating, approving and executing a transaction for a client at Goldman Sachs is now fundamentally different.
This difference reflects significant changes to processes, business standards, documentation and transaction approvals, all of which impact our approach to decision-making. Going forward, we will inevitably make mistakes, but we commit to learn from them and respond in a way that meets the high expectations of our clients, shareholders, other stakeholders, regulators and the broader public.
In addition to the report, we have made additional material related to the impact of the BSC available on our website, www.GoldmanSachs.com/BSCImpactReport.
This material includes video excerpts from the Chairman's Forum, a discussion on the impact of the Client and Business Standards Committee and an example of a life cycle of a client transaction.
The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centers around the world.
The Goldman Sachs Group, Inc.
Jake Siewert, 212-902-5400
Dane Holmes, 212-902-0300
KEYWORDS: United States North America New York
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