Goldman as Case Study, Not Hero or Villain

There once was a time, before JPMorgan Chase’s woes dominated headlines, when Goldman Sachs was the symbol for Wall Street’s dark side. The bank’s depiction as a blood-sucking “vampire squid” in a Rolling Stone article captured the public’s imagination. And “Why I Am Leaving Goldman Sachs,” a resignation letter published as an opinion piece in The New York Times, also touched a nerve, describing the bank’s culture as “toxic.”

Amid the vitriol, Goldman has had plenty of defenders. They argue that the bank performed far better than its peers during the financial crisis and continues to be a profit-making machine. It still lands the biggest, most prestigious banking assignments, has unparalleled risk management and remains the bank of choice for top scholastic recruits.

So which is it?

Steven G. Mandis, a Ph.D. candidate in sociology at Columbia University, takes a measured, academic approach to the question in a new book, “What Happened to Goldman Sachs,” an examination of the bank’s evolution from an elite private partnership to a vast public corporation - and the effects of that transformation on its culture. The book, published by Harvard Business Review Press, comes out on Tuesday.

“You read about Goldman Sachs and it’s either the bank is the best or the bank is the worst,” Mr. Mandis said. “This is not one of those books - things are never black or white.”

Mr. Mandis, who also teaches at Columbia’s business school, has special insights into Goldman beyond his academic training - he worked at the bank for a dozen years.

The son of Greek immigrants, Mr. Mandis, 43, grew up in Grand Rapids, Mich. He joined Goldman in 1992 after earning an economics degree from the University of Chicago and served in a variety of posts. He worked for several years as a mergers-and-acquisitions banker and later joined the proprietary trading desk, making bets with Goldman’s own money.

Mr. Mandis left Goldman in 2004 to join a hedge fund firm, and after four years there did stints at the management consulting firm McKinsey & Company and Citigroup. In 2008, he began taking classes at Columbia and was later accepted to the Ph.D. program in sociology. After writing a paper about organizational change, a professor encouraged him to write about Wall Street.

“He said no one in sociology understands banks so you can make a contribution in that area,” Mr. Mandis said.

That prompted the budding sociologist to pose a series of questions. Did the culture change at his former employer? And if so, why and how?

Mr. Mandis said that the two popular explanations for what might have caused a shift in Goldman’s culture - its 1999 initial public offering and subsequent focus on proprietary trading - are only part of the explanation. Instead, Mr. Mandis deploys a sociologicial theory called “organizational drift” to explain the company’s evolution.

“Organizational drift is a process whereby an organization’s culture, including its business practices, continuously and slowly movies, carried along by pressures, departing from an intended course in a way that is so incremental and gradual that it is not noticed,” Mr. Mandis writes.

The essence of his argument is that Goldman came under a variety of pressures that resulted in incremental changes to the firm’s culture, resulting in a much different place than in 1979, when the bank’s former co-head, John Whitehead, wrote its much-vaunted business principles.

These changes included the shift to a public company structure, a move that limited Goldman executives’ personal exposure to risk and shifted it to shareholders. The I.P.O. also put pressure on the bank to grow, causing trading to become a more dominant focus. And Goldman’s rapid growth led to more potential for conflicts of interest and not putting clients’ interests first, Mr. Mandis says.

A Goldman spokesman, David Wells, said in a written statement that after the financial crisis, the bank has “done a lot of work since then to reinforce and strengthen the most important parts of our culture, but it’s not unusual for a person to think the place he or she worked isn’t the same after he has left.”

“We wish him all the best,” Mr. Wells added.

Mr. Mandis said that he is neither for nor against Goldman but instead trying to make a contribution to the science of organizational behavior and management.

“The book is for executives whose companies have grown from 10,000 to 50,000 people and want to better understand the consequences of that growth,” he said.

Though it grew out an academic paper, “What Happened at Goldman Sachs” is accessible and clearly written. Goldman-philes will also find it useful for its appendices, which include a timeline of the bank’s history and biographical sketches of its key leaders through the years. There is also a complete list of the several hundred Goldman partners at the time of its 1999 I.P.O. and the value of their stock holdings after the first day of trading. (Spoiler alert: The I.P.O. made them really rich.)

Mr. Mandis, who lives on the Upper East Side of Manhattan with his wife and two daughters, is teaching a course at Columbia Business School this fall on investment banking while pursuing his doctorate. He also continues to invest; last month, a small-business lender he backed, RapidAdvance, was sold to an affiliate of Quicken Loans in a deal valuing the company at $100 million.

He is also not the only author in his family. Last year, with the help of her parents, Mr. Mandis’s older daughter, Tatiana, 12, self-published “Athens: Top 50 Places to Visit and Interesting Stories That Bring Them to Life.” The travel book grew out of the family’s visits to Greece.

“Now that book,” said the proud father, “is a whole lot more impressive than writing a Ph.D. thesis.”