December 10, 2009 | Read Time: 3 minutes
The investment bank Goldman Sachs has pledged $500-million to help develop small businesses and train entrepreneurs, a much-scrutinized decision that some critics say is designed to improve the company’s image.
The financial-services company announced its program, which it said would create or expand 10,000 small commercial enterprises across the country, at a time when it faces withering criticism for the billions of dollars in compensation it is expected to pay employees this year.
Some have characterized Goldman Sachs’s philanthropy as a way to quell the public anger.
“It wasn’t a philanthropic move made out of proactive generosity,” said Nomi Prins, a former managing director at Goldman and now a senior fellow at Demos, a public-policy advocacy group in New York.
The amount Goldman is contributing is “pennies” compared to its salaries and bonuses, she said.
In addition, Curt Weeden, a consultant who helps corporations with their giving, said the Goldman move would do little to ease people’s criticism of the company’s role in last year’s financial crisis.
The philanthropic program, he added, “is not as sharply focused as contribution programs developed by other less profitable businesses.”
‘Broad Distribution’
Goldman said the small-business program is not a public-relations move.
The company said the philanthropic project has been in development for almost a year and is modeled after its 10,000 Women Initiative, which helps educate female entrepreneurs in 18 countries.
People who helped craft the new program defended its mission.
“Goldman is trying to make sure there’s a broad distribution of job opportunities across the economy,” said Mark Pinsky, chief executive of the Opportunity Finance Network, a coalition of community-development financial institutions.
Mr. Pinsky helped the company develop the charitable project.
Most of the commitment — $300-million — will help credit unions and other types of nonprofit groups provide capital and business training to people in impoverished neighborhoods and other areas often not served by commercial banks.
Of that money, Goldman is offering $50-million in grants and $250-million in loans, which the finance charities will offer as credit to people who want to start or expand their businesses.
Mr. Pinsky said the support will be crucial to his membership. “It’s been an illiquid market for a long time now,” he said. “For Goldman to put $300-million into the marketplace is a big deal.”
Asked if he is concerned about the negative views surrounding Goldman’s philanthropy, Mr. Pinsky said: “I am not concerned about a potential backlash against CDFIs [community-development financial institutions] for participating in this. The timing of release and what is said about it is Goldman’s business, not our business.”
Money for Classes
In addition to helping credit unions and other community finance groups, Goldman said $200-million will support scholarships for small-business owners to attend classes at community colleges, universities, and other educational institutions.
Initial grant recipients include the LaGuardia Community College and Seedco Financial Services, both in New York.
Their Goldman Sachs-supported efforts will start next year.
In addition to the monetary pledge, the New York company has recruited high-profile advisers, including the financier Warren Buffett, to guide the effort.
The team includes Michael Porter, of the Harvard Business School; Hilary Pennington, of the Bill & Melinda Gates Foundation; and Margaret Spellings, former secretary of education during the George W. Bush administration.
In a statement, Mr. Buffett said: “Our recovery is dependent on hard-working small-business owners across America who will create the jobs that America needs. I’m proud to be a part of this innovative program, which provides greater access to know-how and capital — two ingredients critical to success.”
