The organizational structure of investment banks differs widely across firms within the industry. There is not any one “typical” organization, and what works for one firm may not work for another. Much of the organizational structure often is related to the internal politics and alliances within the firm Sometimes the politics takes on a life of its own. For example, it is not unusual for an individual to be a very successful after moving to a competing firm. The lack of success may not be due to the individual per se, but to the environment at the first bank, which may have leveraged the individual’s talents more the environment at the competing bank. Also, it is not unusual that when a major banker moves to a competing firm, her entire team, or at least most of them moves as well. It is difficult for a firm to replace a “star,” and it is difficult for a star to be star without her team.
At one time, the investment banking industry was close-knit group of mostly privately owned partnerships. Now, of the major investment banking firms, only one partnership remains, Goldman Sachs, and the other partnerships have either been purchased by conglomerates or “gone public.” We will examine these three forms of organizations in the investment banking industry: the partnership, the conglomerate unit, and the public firm.
The partnership: A partnerships is a firm owned by two or more persons who share in the profits of the firm. A partner is a part owner of the firm. All partnerships have at-least one general partner who is responsible for the daily operations and functions of the business, and who is liable for the firm’s operations. However, many partnerships also have limited partners whose commitment is limited to the financial side, who are not involved in the daily operations of the business, and who enjoy limited liability.