Eleven young people in the healthcare team at the investment banking division of Goldman Sachs have retired. What’s going on inside the team that just pulled off a massive Amazon acquisition at the end of July?
Goldman Sachs, a major U.S. financial giant, is losing its young staff one after another.
At least 11 junior employees left the healthcare industry team at its main investment banking division alone in the past few weeks at its New York headquarters.. That’s one-sixth of the junior bankers on the team.
Three current and former Goldman employees who spoke to Insider said the dissatisfaction with the harsh working conditions and compensation was the trigger for the high turnover.
To give you an idea of what’s going on, here’s an overview of the roles in investment banking in the US: Typically, you start as an analyst and work your way up to associate, vice president, director, and managing director. To go.
Analysts and associates, most of whom are in their 20s, are called junior bankers, and vice presidents and above are called senior bankers.
According to two people familiar with the mass separation, the health care teamAt least six new analysts quit en masse after receiving August bonuses.
In addition, five other associates have left the company in the last few weeks. When I spoke to one of them, he told me that the amount of bonus he received was not enough, which compounded his personal frustration and disappointment.
About 60 junior bankers were on the health-care team before 11 junior employees left.
With the loss of one-sixth of that force, “the remaining team members are undoubtedly feeling a lot of stress in the face of the enormous workload, including filling the gaps of those who left.” Active employees speak.
At an investment bank whose main business is advice on mergers and acquisitions (M&A), underwriting of stock and corporate bond issuances, and investment in its own account, senior bankers acquire and manage projects, while junior bankers conduct research, analysis, and document preparation. etc.
Current bankers and retired associates say that such a concentrated exodus of talent “Health care teams may find it difficult to execute on existing deals and their ability to win new deals (primarily senior bankers) may be compromised” he said.
The healthcare team in Goldman’s investment banking division boasts the second largest net operating revenue (equivalent to operating company sales) in the U.S., and is known for its hard work regardless of its position in the industry.
Managing directors and directors are preoccupied with developing new projects and dealing with client companies, while vice presidents and below must steadily carry out acquired projects.
On top of that hard work comes the burden of filling the void left by many young workers. At the same time, HR personnel will be forced to hire (to fill the gaps).
Rewards that were ‘disappointing’ for young people
Starting in 2021, Goldman Sachs is seeing a series of outflows of young talent, not just from the healthcare team.
The background to this is that remote work has been prolonged due to the spread of the new coronavirus infection, and an increasing number of young people are suffering from burnout, but at the same time, Goldman’s unique corporate culture and harsh working environment are ignored. Can not.
August is bonus season for junior bankers.It is common for young people to change jobs immediately after receiving a bonus in the early months(Note that senior bankers are paid bonuses in January following year-end performance evaluations.)
That said, it is truly a rare situation for so many people to quit all at once. Moreover, it is not uncommon for six first-year analysts to quit at the same time.
According to a person close to Goldman,All six new analysts submitted their resignations to the company on Aug. 24 and left the same day..
Five associates, meanwhile, have left the company at different times over the past few weeks, but all said their main reason for leaving was the same: a significant cut in bonuses compared to the previous year. One associate explained.
According to this former associate, the bonuses paid in August for both associates and analysts were significantly reduced by 60% from the previous year.
“I think[all my retired colleagues]had a common perception that they weren’t getting the recognition and compensation they deserved for their hard work,” said the current employee.
According to the former associate,The lowest bonus a first-year associate received in August was $25,000, absurdly low compared to typical years in the investment banking industry..
on the other handThe maximum bonus for a first-year associate is $75,000 (about 10.5 million yen). The 2021 health care team’s best-of-breed bonus was $200,000, so it certainly pales in comparison.
However, some point out that it is strange to compare with the previous year in the first place.
In 2021, the listing boom (from 2020) through mergers with special purpose acquisition companies (SPACs) continued, and corporate capital demand was strong, and underwriting commissions for stocks and bonds increased to a record high. As a result, investment banks were all performing well.
On the other hand, there was a shortage of human resources, especially young people, and it was a complete seller’s market, so Wall Street financial institutions raised salaries.
So to speak, 2021 was an exceptional year.
Based on this, Goldman’sAssociates were reluctant to persuade young employees not to compare their bonuses to the previous year when several vice presidents of the healthcare team advised them not to do so.It says.
The base salary for the first year as an associate is $150,000 (approximately 21 million yen) per year, and when bonuses are added, annual income levels range from $175,000 to $225,000 (approximately 24.5 million to 31.5 million yen).become.
Publicly, it’s definitely in the high-income category, but for junior bankers, who default to levels through 2021, it’s been “totally disappointing.”
Pressure on the investment banking sector
Again, 2021 was an exceptionally profitable year. Since then, deal volumes have shrunk, and M&A advisory fees and equity underwriting fees have plummeted.
The financial results for the second quarter of 2022 (April-June) announced by Goldman have significantly decreased sales and profits. Net operating revenue, or sales, fell 23% year-over-year to $11.8 billion, while net income fell 47% to $2.9 billion. Among the business segments, the investment banking division’s net operating revenues fell 48%, dragging down the overall performance.
As a result, Chief Financial Officer Dennis Coleman said the company would review all spending and investment plans, saying it would “slow down the pace of hiring.” He also hinted at the possibility of reviving personnel reductions by the end of the year through a rating system called “Strategic Resource Assessment (SRA),” which was suspended during the pandemic.
at GoldmanEvery year, the bottom 5% of employees who received low evaluations in the SRA were subject to personnel reductions..
Goldman announced its second-quarter results on July 18, so it’s possible that Coleman’s CFO’s remarks on the earnings call influenced the decision to leave the company’s younger employees on the healthcare team. .
Goldman Sachs generated more than $3.6 billion in net operating revenue from its healthcare M&A advisory practice between 2018 and 2022, according to research firm Dealogic.
The figure is second only to JPMorgan Chase’s $4.22 billion, and is well ahead of peers such as Morgan Stanley and Bank of America.
In the U.S. alone, Goldman outperformed JPMorgan Chase in net operating revenues of $1.6 billion over the past four-and-a-half years. This is the second largest after independent investment bank Centerview Partners.
Goldman’s healthcare team has advised on five M&A deals in the past three months alone, including one for Amazon’s primary care startup One Medical. It’s a big acquisition.
As previously reported by Insider (July 23), Goldman’s managing director Jim Sinclair was an advisor to One Medical in the $3.9 billion acquisition. led negotiations with Morgan Stanley.
Global M&A activity has fallen sharply in 2022 on concerns about a recession and rising interest rates, but current Goldman employees say their healthcare team is looking at potential buyers for their clients. It is said that he is as busy as before with scrutiny, sales of new projects, and customer development.
For such a full-time healthcare team, the loss of at least 11 young bankers in one fell swoop is a huge blow, and one that will undoubtedly affect its ability to perform its duties.
The team’s senior bankers temporarily “could slow down” new deals and customer acquisition, said a former associate.
Frustration with Goldman’s corporate culture
This isn’t the first time Goldman has been hit by a defection of younger employees who are dissatisfied with the working environment.
In March 2021, the results of two surveys of analysts in the firm’s investment banking division were leaked, alleging a lack of support from the company for remote work, long working hours of 100 hours per week, and a prolonged pandemic. The existence of dissatisfaction and criticism, such as accumulation of mental fatigue, and the specific contents of it became clear.
But since the spring of 2021, there is no evidence that Goldman has taken such criticism seriously.
In the summer of 2021, 12 of the 16 analysts on the technology, media and telecommunications industry team in the investment banking division of the company’s San Francisco office, three-fourths of them, will retire within two years of joining the company. chose the way to.
As a result, the team was forced to abandon several projects, Insider reported in the past (July 8, 2021), citing internal sources.
A spring 2022 survey of about 500 investment banking analysts by Wall Street Oasis, an online community of financial professionals, found young Goldman employees continue to work long hours. It was revealed that they were forced to work and answered that their mental and physical health conditions had deteriorated.
Thirty-nine percent of respondents worked 90 or more hours per week (down 4 points year-on-year), and their mental health averaged 8.5 out of 10 before joining the company, compared to 4.1 points at the time of the survey (down 4 points from the previous year). was 4.7 points). It can be said that the work environment is astonishingly harsh as ever.
One of the respondents who moved from Goldman to an independent investment bank commented:
“My life has changed a lot since I left Goldman. I’m still in investment banking and I work 80 hours a week, which is far better than the 110 hours I worked at Goldman.”
In March 2021, Goldman CEO David Solomon sent a voice message to employees after the results of the internal investigation leaked to the outside.
The gist of it was that, although we heard people asking for help, doing more for our customers would be the silver bullet to get us through difficult times.
“There may be times in the months ahead when we feel like we are pushing ourselves harder than others. Don’t forget that going to 2 will make a huge difference in our performance.”
[Original: An exodus at Goldman Sachs: 11 members of the bank’s healthcare team have left the firm over complaints about working till 5 am and being hit with lower bonuses]
(Translated by Hiroshi Tahara, edited by Chikara Kawamura)
Source: BusinessInsider
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