The report presents an analysis and evaluation of Goldman Sachs a leading financial services company on its corporate strategies in accordance with governance and ethics legislation regarding Abacus mortgage backed CDOs.
In this report the accusations laid against Goldman Sachs shall be verified according to laws and codes set by financial committees of the UK and USA. The underlining question this report analysis’s is “can a company be profitable while at the same time being responsible and accountable”, since its reason for existence is to create wealth for its shareholders.
The principal conclusion is that Goldman Sachs made a number of errors especially when dealing with its investors; not disclosing vital information on time.
TO: Board of Directors
FROM: Governance analyst
DATE: 03rd April 2013
SUBJECT: The Goldman Sachs Abacus deal
1.1Goldman Sachs at a glance
Goldman Sachs is a global investment bank that has recently proven itself and its ability to be one of the most successful banks of all time by not just surviving the recent financial meltdown but overcoming the odds and managing to be at the forefront of banking industry. Goldman managed to survive the financial meltdown with some help from the government by changing itself into a commercial bank holding firm in 2008. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centres around the world.
Its portfolio includes the following: corporations, financial institutions, governments and high-net-worth individuals. Goldman Sachs’ multi-business is divided in four groups: Investment Banking, Trading and Principle Investments and Asset Management and Securities Services.
2.0 EXTERNAL ANALYSIS - PEST ANALYSIS
The external analysis pinpoints those factors that are beyond the control of the organisation but which affect its ability to achieve strategic goals (Mercer, 1991). A PEST analysis looks at the Political, Economic, Social and Technological drivers of a particular industry. These factors must be analysed and understood in order for an organisation to succeed. Macro Factor
| Impact on Goldman Sachs
| Government policies
| The senate approved 90% surtax on bonuses granted to employees who earn more than $250,000 at financial firms that received at least $5 billion from the Troubled Asset Relief Fund (TARF).
| Recession/Market fluctuations
| The recession has had adverse effects on the cash flow. It has also experienced significant losses to their Trading and Investment activities due to market fluctuations and volatility. Consumers are less willing to risk their money on investments that do not grantee them a return.
| Financial knowledge; performance is largely dependent on the talents and efforts of highly skilled individuals. Qualified people from different demographics are seeking quality education therefore increasing the poll which Goldman can choose from.
| The internet
| A dramatic increase in computer based or other electronic trading may have adverse effects on commission and trading revenues; reduce their participation in the trading markets and associated access to market information and lead to the creation of new and stronger competitors.
| Internal analysis SWOT (Appendix 1)
3.0 CORPORATE SOCIAL RESPONSIBILITY
It is the idea that a business has a duty to serve society in general as well as the financial interest in stockholders. They are four types of social commitment: economic, legal, ethical and discretionary social responsibilities. (Lecturer notes, 2012) Corporate social responsibility has become a vital part of the business conversation. The issue is not whether companies will engage in social responsible activities, but how. For most companies, the challenge is how best to achieve the maximum social benefit from a given...
* Allen, F., and Gale, D., Understanding Financial Crises, 2007, Oxford University Press
* Johnson, G., Scholes, K., Whittington, R., Exploring Corporate Strategy, 2008, Prentice Hall
* Goldman Sachs, 2010. Annual report 2009 – 2010. [Online] Available at http://www.goldmansachs.com/investor-relations/financials/current/annual-reports/2010-annual-report.html [Accessed 23rd September 2012]
* Goldman Sachs, 2010
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