By Olivia Oran
SAN FRANCISCO (Reuters) – In Goldman Sachs Group Inc’s latest move to bolster its street cred as a cool, tech-savvy bank, the firm held its annual shareholder meeting in its San Francisco headquarters on Thursday.
Goldman has been one of the top investment banks handling mergers and IPOs for the tech sector since the dot-com boom of the 1990s. But more recently, the bank has been trying to mold itself into a tech firm of sorts, too.
Chief Executive Lloyd Blankfein has been saying for years that Goldman, founded in 1869, is more of a cutting-edge technology company than a gray-haired investment bank. Lately he’s been putting Goldman’s money where his mouth is: The bank has led several high-profile investments in startups that are disrupting the financial sector and is taking big steps to shift more of its business through electronic channels.
In just the past few weeks, Goldman has hired an executive to build a digital lending platform, co-led a $50 million investment in a bitcoin startup and launched a podcast called “Exchanges at Goldman” in which senior executives talk about technology on Wall Street, among other things.
“You already know why we’re here,” Blankfein said on the sidelines when asked why the bank chose to hold its meeting in San Francisco, given the region’s strong focus on entrepreneurship. “I’m not going to waste any time telling you while we’re here.”
This is the third year in a row Goldman has held its meeting away from the East Coast.
During the meeting, Blankfein addressed a shareholder question regarding Goldman’s stance on military tensions in the South China Sea.
“China is very, very important for us, for business and for peace and stability in the world,” he said.
He also told reporters that while global economic conditions have improved, “I don’t think we’re anywhere near the top quartile. I hope I don’t look back and look at this as the Golden Age.”
Shareholders voted through plans to approve pay packages for senior management, as well as the election of Goldman’s board of directors, including new additions Mark Flaherty, the former vice chairman of investment management firm Wellington Management Co, and former Goldman fixed income co-head Mark Winkelman. They also approved the bank’s stock incentive plan and the appointment of PricewaterhouseCoopers LLP as its accounting firm.
Shareholder proposals regarding vote counting, the vesting of equity awards for senior executives who enter government service and right to act by written consent were not approved.
Of course Goldman is not the only Wall Street bank to notice how technology is changing the world – all of its major competitors have been talking a lot more about technology, spending a lot more money on it and trying to win more business from tech clients. But Goldman has arguably been the most aggressive in making strategic investments and reshaping itself for a digital world. Roughly one-quarter of its 34,400 employees now work in tech.
The person in charge of Goldman’s technology efforts is chief information officer R. Martin Chavez, a scientist by training who developed trading systems inside Goldman before taking on his current role. Under Chavez’s tutelage, Goldman also has been looking at ways to use technology for lending, compliance, risk management and cost-cutting.
The bank has been doing this in part through a team called the principal strategic investments group, which puts money into companies that are disrupting the financial services industry.
That group recently chaperoned Goldman’s portion of a $50 million funding round for a startup named Circle Internet Financial Ltd, which uses technology to perform transactions without a middleman. Goldman sources say the bank views the technology, called “blockchain,” as a transformative tool for trading.
Last year, the strategic investments group also orchestrated a $66 million investment in a secure chat and data platform called Symphony Communication Services Holdings LLC. Goldman executives view the platform both as a way to cut costs from external providers, and as a way to streamline communications.
Though Goldman has no branches or ATMs, it is planning to make inroads into traditional lending though technology. It recently hired Harit Talwar from Discover Financial Services to create a digital lending business that can put its $83 billion in deposits to more profitable use.
In a more familiar realm of banking, Goldman remains one of the top two global investment banks handling mergers, stock offerings and private transactions.
It competes head-on with Morgan Stanley in courting technology entrepreneurs to take their companies public and manage their wealth afterward. Goldman was ranked as the top underwriter for technology public offerings last year, according to Thomson Reuters data, capturing 18.4 percent of market share. Goldman advised on 26 technology mergers globally last year, the highest number of its peers.
A sign of Goldman’s tech savvy may come from its role – or lack thereof – in taking two of the most high-profile tech companies public.
Although Goldman did not manage Facebook Inc’s disastrous IPO in 2012, it was a major investor in the social-media network before it went public. Goldman did lead Twitter Inc’s 2013 IPO soon after; its top tech banker, Anthony Noto, left to become Twitter’s CFO.
(Corrects last paragraph to say Anthony Noto left to become Twitter’s CFO, not CEO)
(Reporting by Olivia Oran; Editing by Lauren Tara LaCapra, Leslie Adler and Sriraj Kalluvila)