Goldman Sachs (GS) has dedicated $500 million to helping small businesses in the US grow and create jobs. While some critics say the move is an attempt by the company to polish its tarnished image, Dina Powell, head of the Goldman Sachs Foundation, insists that “effective philanthropy has been a core value of the firm for 140 years.”
Powell is in charge of disbursing the foundation’s $500 million-plus in assets. She says the previous focus in GS philanthropy was on dividing funds between museums, operas houses and education. In 2007, the company decided to reorganize its charitable giving so that it related more narrowly to its overarching goals. They began to focus on generating economic growth, especially in the area of small businesses.
In an ambitious move, GS decided to dedicate half a billion dollars to a cause they called “10,000 Small Businesses.” The approach was two-fold: to provide urban small business owners with helpful resources such as specialized training, mentoring and also access to capital.
GS believes that helping small businesses involves more than just throwing money at them: education and mentoring play key roles in business success. But in an economic climate where large banks are hesitant to make loans to small companies, access to capital can be vital. Understanding this dual principle, GS set aside $300 million in loans and grants, with the remainder going to education programs for business owners.
By nurturing small companies that show potential and giving them the resources they need to expand, GS hopes to have hit on the right recipe for job creation and growth. In the end, it would not only make a difference for the small businesses themselves but for the economy as a whole.
But critics such as Nicolas Bloom, an economist at Stanford University, believe that GS is potentially doing more harm than good.
“The types of things a pie baking shop needs to know are either very detailed skills the Goldman Sachs guy won’t know about, or very basic things like how to keep accounts in Excel, which they typically already know,” says Bloom.
Still, GS executives are encouraged by the results in the six cities already targeted: New York, New Orleans, Houston, Los Angeles, Chicago, and Long Beach, NY. The next target city is Chicago.
Kolhatkar, Sheelah. “Goldman’s Jobs Act.” Businessweek.com. May 24, 2012. http://www.businessweek.com/articles/2012-05-24/goldmans-jobs-act#p2