Goldman Sachs: two’s company
Splitting the top job can work, but only with two self-effacing bosses
\The ego of the typical investment banker, cynics say, is a paradox like the universe: infinite yet constantly expanding. That makes it hard to imagine co-chief executives running Goldman Sachs, a possibility sole CEO Lloyd Blankfein countenanced this week. Splitting the top job can work, but only with two self-effacing bosses.
Collegiality is more remunerative at a partnership, whose members split profits, than a quoted group, where shareholders want a slice. Goldmans was run successfully by duos until it shed its partnership status in 1999.
Co-chief executives can do a good job at listed groups too, on the rare occasions when they occur. A 2012 US study suggested co-CEOs generated extra risk-adjusted returns of 2.6 per cent a year. That should please investors at Standard Life Aberdeen, a UK savings group run by the pairing of Keith Skeoch and Martin Gilbert.
The division of labour follows a merger, a common cause. Usually, one co-CEO steps down in time. There are only two businesses in the S&P 500 with co-chief executives, according to S&P Global — Texan insurer Torchmark and Californian tech group Synopsys.
Goldman is unlikely to join their tiny club. The bank needs firm leadership. The shares have lagged behind the S&P 500 this year. One woe is industry-wide: increased capital requirements that have shrunk returns on securities trading. Another is specific within the top tier of US banks: the lack of a big retail business to compensate for tough wholesale conditions. Goldman has failed to adapt as new technology squeezes fund management margins, adds analyst Dick Bove of Vertical.
Mr Blankfein was engaging in the mature American male practice of “joshing” (as in: “Fie, Davenport, I was merely joshing when I disparaged your ascot!”). But joshing to a purpose. Co-chief operating officers Harvey Schwartz and David Solomon are vying to succeed him. Mr Blankfein was reminding them to keep it civil, just in case they are a permanent double act.