 "Goldman Sachs Group Inc.'s Chief Executive Officer David Solomon")
One day in mid-June, Lloyd Blankfein called David Solomon (pictured), chief executive of Goldman Sachs. Solomon had not been expecting it.
Blankfein, a big Goldman shareholder and Solomon’s predecessor, had lost $50 million since January on his stake because of the bank’s sinking stock. He made it clear to Solomon that his patience was waning, according to three people briefed on the conversation. Blankfein offered to provide him with more hands-on advice, or even return to the firm in any capacity that might help, the people said.
Solomon, politely but firmly, turned Blankfein down.
It has been a slog for Solomon. Now in his fifth year as Goldman’s leader, he is struggling to steer the elite investment bank through a humbling stretch that has brought intense focus on his management style.
In July, Goldman reported a collapse in profits, the result of a misbegotten foray into consumer banking that the firm is unwinding. Goldman has undergone three rounds of layoffs over the past year. Its stock trails that of its peers.
It isn’t just Blankfein who is fed up. Senior Goldman partners, former executives and investors have expressed frustration with the bank’s performance amid a turnaround plan that has yet to show results. It’s an unusual indication of unrest at a firm whose 400 or so partners have long observed an informal keep-it-in-the-family rule.
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Goldman’s troubles have also raised questions about the future of Solomon’s leadership, according to current and former executives involved in deliberations about the firm’s future. Even his own friends lament that his side gig as an amateur DJ has become a needless distraction. Solomon has also attracted criticism for jet-setting trips, including to private resorts owned by a company in which he has personally invested.
“The guy is up against the wall because he pissed off everyone at the company,” Dick Bove, a veteran banking analyst, said. “Solomon does not have a personality which gains the loyalty and respect of his subordinates.”
Solomon isn’t oblivious to his weak points, according to his friends and current and former Goldman colleagues, who say the Goldman chief is aware of and bothered by his unpopularity. He has recently taken to asking people inside and outside the firm how he might address his behaviour, recognising that it’s not just Goldman’s business that needs correcting.
Solomon declined to be interviewed. A Goldman spokesman, Tony Fratto, said no current bank executive or board member would be made available for this article. “David is direct and focused on results,” Fratto said in a statement. “Our clients and investors are direct, and they expect results.” This account is based on interviews with 19 people who have knowledge of Solomon’s travails, many of whom requested anonymity to speak freely about the challenges he is grappling with.
Goldman has long been regarded as Wall Street’s most prestigious investment bank, whose partners have often gone on to build successful second careers.
Its alumni include Gary Gensler, the chair of the Securities and Exchange Commission, and Rishi Sunak, the British prime minister. Two of the last three governors of New Jersey and four former Treasury secretaries also worked at Goldman — hence the nickname Government Sachs.
A former junk bond salesman with a hard-charging streak, Solomon was appointed to the top job in 2018, only the 10th chief executive in Goldman’s 154-year history. A Goldman executive described him as “less than warm-and-fuzzy — if you’re looking for a guy to pat you on the back, that’s not him.”
Like chief executives of many public companies, Solomon is employed at will and can be fired by the board at any time.
There is little indication that such a move is imminent, and a person present at the most recent board meeting said there was no serious discussion of a change beyond the routine evaluation of the chief executive’s work. Still, the board slashed Solomon’s 2022 pay by nearly 30 percent, to $25 million, citing the bank’s performance “both on an absolute basis and relative to peer results.”
After a rally over the past month, Goldman’s stock is down 2 per cent this year, compared with a 14 per cent gain for JPMorgan Chase. The S&P 500 stock index is up 17 per cent.
Under Solomon’s tenure, Goldman has suffered a string of indignities. In addition to losing billions on its consumer banking business, its involvement in Silicon Valley Bank’s demise is the subject of government scrutiny. It has taken losses on investments in commercial real estate. And while it is hardly the bank’s fault that mergers and acquisition activity is down, by some metrics Goldman has surrendered its lucrative top spot as the go-to adviser to companies.
