According to Bloomberg BusinessWeek and the WSJ, Goldman Sachs Group, Inc. (NYSE:GS) has ended a quarter century practice of awarding two year contracts to junior bankers. These contracts have typically been awarded to recent college graduates, and usually ended with a job offer from Goldman Sachs, or another company of similar stature.
The company announced its decision to reduce the contracts for analysts recruits for this year. According to David Wells, this decision does not affect the bank’s desire to help young analysts succeed. In a statement, he said, ” we will continue to provide the skills and time needed to understand our hiring and developing the careers of analysts in our banking and investment management divisions. Making this change allows us to emphasize the longer term career opportunities available at the firm.”
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It seems that what this statement really says is, we don’t have to keep anyone for a specific amount of time any more, and if they prove unneffective, we can just fire them and hire someone else. However, far be it from me to judge, as I do know how it feels to have an ineffective employee under contract, and having to try to deal with this person until the contract is finally up.
The decision by Goldman Sachs Group, Inc. (NYSE:GS) comes at a time when Wall Street companies are attempting to cut costs at every level, including new recruits. The belt tightening measures taken by Goldman Sachs are just a few, which have been highlighted, against a backdrop of a much bigger picture of a struggling economy. Businesses in every sector are experiencing financial difficulties, including consumer goods, as The Home Depot, Inc. (NYSE:HD) announced its plans to close its Chinese outlet stores, called Big Box, and the oil and gas industry, as companies like Chesapeake Energy Corporation (NYSE:CHK) have resorted to selling off assets to stay afloat.
Goldman Sachs Group, Inc. (NYSE:GS) is the first of several banks who offer these 2 year contracts, to begin cutting them out. Others who offer the junior banking deals include JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc. (NYSE:C), and Morgan Stanley (NYSE:MS). It will be interesting to see if any of these companies follow suit.