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Goldman Sachs grumbling grows for bank to sack CEO David Solomon

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The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the same old suspects — his junior staffers annoyed that they should work late or come into the office several times per week.

Solomon’s problems are more serious and existential, I’m told, and the way he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how for much longer he stays in his job.

Solomon, 60, took the job in 2018 and was all the time somewhat of an odd alternative to run the white-shoe investment bank that sometimes cultivated its leaders from inside. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one in all the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a unusual side gig as a DJ in the summertime Hamptons party circuit. He’s also not one for small talk, and doesn’t seek the advice of with loads of people before handing down his edicts. 

“He doesn’t breed loads of love,” said one former Goldman executive who knows Solomon well.

A number of people at Goldman don’t like him, and so they’re letting their views be heard each internally and with pals at rival firms.

Solomon as a DJSolomon is an outsider at a firm with a wickedly insular culture.David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing an ideal job. Goldman was running on all cylinders in deals and trading. Whilst the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 in comparison with around a 44% rise within the S&P during that point.

Goldman remains to be the highest M&A store, even widening its market share over rivals in that essential business line. Solomon was the primary amongst his fellow CEOs to see the downturn and enact significant layoffs to chop costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all of the shots at any firm, after all. But Goldman’s MDs and partners have historically been a strong force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as increasingly of them defect from his camp.

David Solomon as a DJSolomon was the primary amongst his fellow CEOs to see the downturn and enact significant layoffs to chop costs.David Solomon/Instagram

Here’s how they’re constructing a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which offer regular revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. Up to now, it’s been a disaster, a lot in order that Solomon has been forced to cut back, possibly on the solution to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises may very well be in store as markets proceed to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquartersThe grumbling about Solomon is spreading to the managing director and partner class. AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but a part of their pool is being diverted to bankers to maintain them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in reality is a reasonably lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and may spark management change, because it has done prior to now.

There’s also a matter about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the idea that it might be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the transactional places on Wall Street, means he may very well be in search of a deal and never one which keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which offer regular revenues.AFP via Getty Images

At a time when most Goldman insiders imagine he must do a “transformational deal,” i.e., something big that enables it to raised compete against Morgan Stanley and super banks like JP Morgan, there is theory that Solomon might allow Goldman to be swallowed whole by, say, a giant asset manager or bank if the value was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Nonetheless, there’s something to be said for keeping your producers pleased.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew methods to nurture his people.

Former General Electric CEO Jack WelchJack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew methods to nurture his people.Getty Images

“Jack could chew your ass, then put his arm around you and make you are feeling great,” one in all his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs selected to remain around under Welch, abuse and all, and left when his successor took over, watching GE implode from the surface.

Possibly it’s an excellent time for Solomon to take a page from Welch and begin hugging it out.

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