Goldman grumbling grows for banking giant to sack CEO David Solomon

The knives are out for Goldman Sachs CEO David Solomon, and this time the people wielding them aren’t the usual suspects — his junior employees bored with having to work late or coming into the office several times a week.

Solomon’s problems are more serious and existential, I’m told, and how he handles what can be described as a revolt in some quarters of Goldman’s middle and senior management could determine how long he stays in his job.

Solomon, 60, took the job in 2018 and has always been a bit of an odd choice to lead the white-shoe investment bank that typically cultivates its leaders from within. He cut his teeth at a decidedly anti-Goldman venue: rambling investment bank Bear Stearns (ultimately one of the casualties of the 2008 financial crisis).

He joined Goldman in 1999, as an associate, no less, because his trading chops allowed him to skip layers of management.

In other words, Solomon is an outsider in a company with a wickedly insular culture. He has an offbeat gig as a DJ in the Hamptons summer party circuit. He is also not one to gossip and does not consult many people before issuing his edicts.

“He doesn’t engender a lot of love,” said a former Goldman executive who knows Solomon well.

Many people at Goldman don’t like him, and they’re making their views known both internally and with friends at rival firms.

Solomon is an outsider in a company with a wickedly insular culture.
David Solomon/Instagram

For the record: I met Solomon and I like him for his no-BS style. And until very recently, the numbers show he’s doing a great job. Goldman was operating at full speed in transactions and trading. Even though the market is correcting, stocks are up about 60% since Solomon took over as CEO in 2018, compared to the S&P’s rise of about 44% during that time.

Goldman is still the top M&A store, even expanding its market share over rivals in this important business sector. Solomon was the first among his fellow CEOs to see the downturn and make significant layoffs to cut costs.

Still, the grumbling about Solomon spreads to the general manager and the partner class. Wall Street’s high-priced talent doesn’t call all the shots at any company, of course. But Goldman’s doctors and partners have always been a powerful force when the board decides the fate of the current leadership, making Solomon’s grip on his job increasingly tenuous as more and more of them leave his side.

David Solomon as DJ
Solomon was the first among his fellow CEOs to see the downturn and make significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime investment bank Morgan Stanley now easily eclipses Goldman in market value, from $144 billion to $116 billion, continuing a trend that predates Solomon. It comes amid a downturn in banking, Goldman’s bread-and-butter business and Solomon’s territory.

Morgan CEO James Gorman has skillfully developed the firm’s wealth management operations, which generate stable income. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon babysat. It’s been a disaster so far, so much so that Solomon has been forced to downsize, possibly on the verge of downsizing.

Goldman, meanwhile, missed targets in its recent earnings announcements, and more downside surprises may be in store as markets continue to falter. Bonuses are down, in some places halved, albeit from 2021 nosebleed levels.

Headquarters of Goldman Sachs
The grumbling about Solomon spreads to the general manager and the partner class.
AFP via Getty Images

Traders have done well in 2022 because Goldman is uniquely adept at taking advantage of turbulence, but part of their pool is being diverted to bankers to keep them in-house until the trading downturn subsides.

Since Solomon is a banker, he is also accused of favoritism, which is actually a pretty lame accusation, as bankers often subsidize traders’ bonuses when the markets are not profitable. Still, Goldman’s trading department is powerful and can trigger a change in direction, as it has done in the past.

There is also a question about Solomon’s allegiance to Goldman’s autonomous culture. Throughout its 153-year history, Goldman has assumed that it would be the acquirer of any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he might be looking for a deal, not one that keeps Goldman in control.

Morgan Stanley CEO James Gorman has skillfully grown the company's wealth management business, which generates stable income.
James Gorman of Morgan Stanley has skillfully developed the company’s wealth management business, which generates stable income.
AFP via Getty Images

At a time when most Goldman insiders think it needs to strike a “transformation deal” – something big that allows it to better compete with Morgan Stanley and super banks like JP Morgan , there is speculation that Solomon may allow Goldman to be swallowed whole. by, say, a large asset manager or a bank if the price was right.

As far as I can tell, these growls, while real, don’t immediately threaten Solomon’s work. Again, there’s something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious howler and demanding beyond belief. Yet Welch knew how to feed his people.

Jack Welch, former CEO of General Electric
Jack Welch was a notorious howler and demanding beyond belief. Yet Welch knew how to feed his people.
Getty Images

“Jack could chew your ass off and then put his arm around you and make you feel good,” one of his longtime executives, Bob Nardelli, once told me.

That’s why so many other talented executives chose to stay under Welch, abused and all, and left when his successor took over, watching GE implode from the outside.

Maybe now is a good time for Solomon to pick up a page from Welch and start embracing it.

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