Goldman Sachs is to increase its charitable giving, setting aside $200 million to nearly double the size of its main foundation. The move would seem to be a response to recent criticisms over the firm’s anticipated profits and bonuses. Whether it will have the effect of disarming any public furore is doubtful, however, since the sum is trivial by comparison: in the first nine months of this year, the firm set aside about $17 billion for bonuses and other compensation.
Not surprisingly, such sums strike outside observers as steep, even for doing ‘God’s work’, as Goldman CEO Lloyd Blankfein called it in a recent interview with UK newspaper The Times.‘We help companies to grow by helping them to raise capital,’ he explained, though those unfamiliar with the workings of the almighty might not so clearly see the hand of God in this.
Before the financial crisis, there were apparently internal calls for more giving. Retired co-chairman and former head of its foundation John Whitehead described Wall Street pay levels as ‘shocking’ and said he had tried unsuccessfully to persuade Goldman to give $1 billion to charity, which was rejected because of fears over shareholder reaction. The foundation gave away $12.6 million in 2007, a figure which increased in 2008 to $22 million.
Something that has attracted nearly equal interest among commentators, however, is the investment approach of the foundation. Overall, half the Goldman portfolio is devoted to so-called alternative investments, mainly hedge funds, but also private equity, commodities and real estate trusts, in the fiscal year that ended in November 2008. Ordinary stocks comprised roughly a third of the portfolio. ‘It is pretty unusual for a foundation to be trading futures this actively and across this many markets,’ remarked Verne Sedlacek of Commonfund, which manages more than $25 billion for universities, foundations and other not-for-profit groups.
A Goldman spokesman said the foundation has employed investing and risk management strategies to protect net asset value over time. He declined to provide information about its investment returns or its strategy.
New York Times, 12 November 2009
Andrew Milner is Alliance Associate Editor. Email