Monday, November 17, 2008

Are partnerships coming back?

Mark Wilson who teaches Economics here at SBU has been advocating that a solution to the excessive risk taking and misaligned incentives is to return to partnership arrangements where the management would have more at stake.

Last week in Michael Lewis' epic "The End of Wall Street's Boom" piece the same idea was mentioned. Now Clusterstock investigates what Goldman would look like if it did go private:

Goldman Goes Private:
"Goldman spent most of its existence as private partnership. In a sense, by going private Goldman would be returning to its roots. But odds are that this time around, Goldman's partnership will be very different. These days even private partnerships are often far more open than the partnerships in the past, and openness might be exactly what Goldman needs if it is to survive.

University of Illinois law professor Larry Ribstein has been a pioneer in the study of how private partnerships have been used as alternatives to solving sticky problems of corporate management. Much of his work has centered on the problem of aligning managers' and owners' interests. He notes that the private partnership model popular in the private equity world might be very useful for Goldman here."

No comments: