Goldman Sachs Is at War With Itself
CEO David Solomon has come under fire from partners who complain about bonuses, strategy and that DJ side gig
When Goldman Sachs GS 1.03%increase; green up pointing triangle partners descended on Miami Beach for the bank’s annual confab of senior leaders in February, it was a former CEO, Lloyd Blankfein, who stole the show.
Blankfein, holding court at the hotel bar before a gathering of Goldman partners, groused about his successor, according to people familiar with the matter. David Solomon, Blankfein said, was spending too much time away from his day job, jetting around on Goldman’s private planes and DJing at nightclubs and festivals.
Blankfein wasn’t the only one complaining. Partners faulted Solomon, who wasn’t present at the bar, for presiding over a money-losing expansion into consumer lending that Goldman is now unwinding. The consumer business, they said, didn’t make the partners money. That stood in contrast with the bank’s other units.
Cracks are forming in a Wall Street institution: the vaunted Goldman Sachs partnership.
Most bank CEOs make big decisions with a cadre of executives. Goldman isn’t like other banks. Some 24 years after becoming a publicly traded company, Goldman maintains a partnership of about 420 members, many of whom think they’re just as important as the CEO.
In his nearly five years as CEO, Solomon, 61, has sought to impose corporate discipline on the freewheeling structure. Partners accustomed to little oversight and lots of deference aren’t thrilled.
Solomon has sparred over bonuses with the partner who leads the bank’s traders. Another longtime partner threatened to quit when Solomon restructured the bank’s private-investing businesses. John Rogers, a Goldman partner since 2000, and the secretary to the bank’s board, expressed concerns to Solomon about his DJ side gig, according to people familiar with the matter, saying it wasn’t a good look for the CEO of one of Wall Street’s most formidable firms.
Goldman spokesman Tony Fratto said differences of opinion reflected healthy debate at the firm and “show partners and business leaders engaging with David on strategy and initiatives.”
“The reality is smart people can have disagreements. It’s normal,” he said.
The internal drama has spilled into public view. Solomon has told partners to refrain from leaking to the media, people familiar with the matter said.
Cracks in the partnership
Solomon needs the support of the partners. He’s presiding over Goldman’s biggest overhaul since the 2008 financial crisis, jettisoning much of the ill-fated consumer business in favor of an expansion of steady fee-generating businesses such as wealth and asset management. A deal-making slump, meanwhile, is battering the bank’s bread-and-butter investment-banking businesses, sending profits down sharply.
Solomon’s allies say he’s managed to revive the bank’s lackluster stock, which is up about 51% since he took over, compared with a roughly 23% decline for a broader index of bank stocks. And the One Goldman Sachs initiative, which incentivizes employees to refer Goldman clients to other divisions of the firm, that he announced on his first day as CEO has helped the bank squeeze more revenue out of existing clients and attain a greater share of their business. Goldman’s senior executives say this initiative has already bolstered the bank’s investment banking and trading returns.
“The stock price has doubled since the depths of the pandemic. And the firm saw record performance in 2021. Doesn’t David deserve some credit for that?” said former partner Gregg Lemkau, who left Goldman at the end of 2020 and is now co-CEO of merchant bank BDT & MSD Partners.
Since the late 1800s, Goldman partners have weighed in on the firm’s direction. They conveyed their opinions to Goldman’s chief—for a long time known as the senior partner—and engaged in debate. Partners sometimes overruled the CEO or persuaded him to go along with their plans.
Tensions have run high among the partnership many times in its history, including over whether to take the company public, in part because of concerns about what it would mean for Goldman’s heritage and how much money partners would make.
Former partners, too, hold considerable sway. Goldman has long maintained close ties to retired executives, including those who’ve gone on to senior government positions. Goldman counts former U.S. Treasury secretaries and a prime minister of Australia among its prominent alums.
Former partners get briefings from the firm’s finance chief and gather annually for dinners in New York and London. Blankfein visits Goldman’s headquarters occasionally, popping in on the trading floors to say hello, eating at the cafeteria and meeting with the people who manage his personal accounts.
For a long time, the CEO was viewed as one of many, less a benign dictator and more the bank’s public face and standard-bearer. Blankfein often behaved like the senior partner, people familiar with the matter said, preferring persuasion to decree when it came to decision-making.