Written By: Andreas Kougionas
This blog is a response to the following article: “Goldman Sachs Said to Plan 25% Cut to Asia Investment Bank Jobs”
Goldman Sachs is one of the largest American-based banks, mainly occupied with investment banking, securities, and other financial services. The total assets of the company amount to a stunning 861 billion USD (“Goldman Sachs”). Recently Goldman Sachs has decided to reduce the number of employs in Asia by 25%. This decision has been said to have been required to decrease the firm’s costs due to the company’s poor equity sale performance (Chan). By decreasing the number of employs the costs diminish which in turn decreases the liabilities, thus helping the company to nullify the balance sheet equation.
Figure 1: Balance Sheet Equation
Source: “The Accounting Equation.” The Accounting Equation Is an Essential Notion in Financial Accounting. N.p.,n.d. Web. 25 Sept. 2016.
However, a phenomenon that can be identified is that Goldman Sachs is not only decreasing its employees in Asia but also other countries. As it can be observed in figure 2, the number of employees laid off is the third largest number after the financial crisis of 2007-2008, and that number is expected to rise as 15 jobs will be decreased in the New York offices and the cuts in Asia will take place (Gandel).
Source: Gandel, Stephen. “Goldman Sachs Announces Its Biggest Layoffs Since Financial Crisis.” Fortune Comments. N.p., 18 July 2016. Web. 25 Sept. 2016.
While the reason for which there is a decrease in the number of employees is established, it is not clear why the effects are so large. Consequently, this brings up the following questions” Why did the equity selling decrease significantly? And what are the possible effects?
Firstly, it is important to view the past and present issues that the firm may have. As a bank Goldman Sachs’s inventory by in large is intangible, but nevertheless, a large inventory, especially a non-performing inventory, can have catastrophic effects as seen with Blackberry. Goldman Sachs was involved in the selling of non-performing mortgage loans (inventory) which were the main root of the crash that occurred which created the financial crisis. Goldman Sachs has confessed that these actions helped fuel the financial crisis of 2007-2008 (Shen). In addition to that, Goldman Sachs is currently being investigated in underwriting a bond (inventory) for the Malaysian government (Chan). Consequently, it can be observed that Goldman Sachs’s actions have been unethical and directed solely towards the best interest of the bank. While in the short-run this might be possible, in the long-run, in the perspective of the customers the value propositions in the business model canvas will alter. One of Goldman Sachs’s value propositions is “our client’s interest always comes first”. However, constant unethical behavior to better the company and its executives does not serve as evidence for that value proposition.
Actions of large firms such as Goldman Sachs can have a powerful impact on many aspects of society. For that reason, I believe it is important for external entities to investigate Goldman Sachs and the possible reason of the decreasing equity sales to assure ethical business practice
Word Count: 438
Works Cited
Chan, Cathy. “Goldman Sachs Said to Plan 25% Cut to Asia Investment Bank Jobs.” Bloomberg. Bloomberg, 24 Sept. 2016. Web. 25 Sept. 2016.
Gandel, Stephen. “Goldman Sachs Announces Its Biggest Layoffs Since Financial Crisis.” Fortune Comments. N.p., 18 July 2016. Web. 25 Sept. 2016.
“Goldman Sachs.” Goldman Sachs. N.p., n.d. Web. 25 Sept. 2016.
Shen, Lucinda. “Goldman Sachs Finally Admits It Defrauded Investors During the Financial Crisis.” Fortune Comments. N.p., 10 Apr. 2016. Web. 25 Sept. 2016.
“The Accounting Equation.” The Accounting Equation Is an Essential Notion in Financial Accounting. N.p., n.d. Web. 25 Sept. 2016.
