One day in mid-June, Lloyd Blankfein called David Solomon, CEO 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.
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,” said Dick Bove, a veteran banking analyst. “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 behavior, recognizing that it’s not just Goldman’s business that needs correcting.
Solomon declined to be interviewed. A Goldman spokesperson, 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 CEO 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 CEOs 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 CEO’s work. Still, the board slashed Solomon’s 2022 pay by nearly 30%, 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% this year, compared with a 14% gain for JPMorgan Chase. The S&P 500 stock index is up 17%.
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.
Dozens of top executives have also departed, most recently Julian Salisbury, a 25-year veteran and member of Goldman’s management committee, and Jeff Currie, the head of commodities research, who joined the bank in 1996. On Tuesday, Solomon told staff members that one of the firm’s longest serving executives, John Rogers, would hand off some of his responsibilities to an associate of Blankfein.
One Goldman partner who left last year described a meeting in which Solomon offered advice: Don’t worry about what your employees think of you.
But Solomon appears to no longer be heeding his own advice, and he has begun casting a wide net for feedback on how he might regain his stature.
At a dinner in July, Bob Steel, a former vice chair of Goldman and former deputy mayor of New York, had some feedback. Steel told Solomon that he was stuck in “quicksand,” and that if he moved, he would get “sucked down,” according to two people with knowledge of the conversation.
Also last month, a friend and former colleague of Solomon’s gave him a list of executives who had been complaining about their leader, and encouraged the CEO to confront them. Solomon responded with a sigh, and said he was wary of provoking further unrest.
“It’s not that easy,” Solomon told his friend, according to the person’s recollection.
Not all of Goldman’s problems can be pinned on its current CEO. Goldman entered the consumer banking business roughly a decade ago, seeing the potential for steady cash flow and cheap money from fees and deposits, which would even out the volatility in Goldman’s trading operations.
But by the time Goldman announced in 2016 that it would build a retail banking business from scratch, under Blankfein’s leadership, it was up against rivals such as JPMorgan Chase and Citigroup, the long-established players in the industry.
Solomon, then Blankfein’s deputy, was eager to hitch his ride to the effort. In March 2019, a few months after he officially took over as CEO, he flew to Cupertino, California, to fete a new partnership with Apple to roll out a credit card. He steamed quietly, however, that he was seated in the audience, and not invited to join Apple’s executives onstage, according to two people he complained to afterward.
Later, he vented to some inside the bank that Goldman’s then head of strategy, Stephen Scherr, was receiving credit for the partnership, the two people said. Scherr later left the bank to become CEO of Hertz rental cars.
As it turned out, Solomon might have been wise to avoid that spotlight. Sign-ups for the credit card have fallen far short of Apple and Goldman’s expectations, and the bank is now exploring selling its piece to a more established credit card company, though it may decide to keep it in the end.
Fratto, the Goldman spokesperson, said Solomon should be judged by the job he had done for clients. The bank has said publicly that the consumer initiatives represent a single-digit portion of the firm’s revenue, and that its trading revenues have fared better than those of some competitors, an indication that big-money customers continue to trust Goldman.
Solomon has his defenders.
Chris Nassetta, CEO of Hilton Hotels, who is a Goldman client and longtime friend of Solomon’s, called him a “genuinely heartfelt, moral, high-quality human being.” Nassetta added, “Whoever coined the phrase, ‘It’s lonely at the top’ … it really is.”
Another friend, Ted Virtue, said some of the criticism simply came with the job. “The dynamics at Goldman — with all the partners and ex-partners — are that there is just a lot of second-guessing and jealousy,” said Virtue, CEO of the private equity firm MidOcean Partners. At the same time, he called Solomon’s DJing activity an unforced error. “I simply don’t understand it.”
Solomon, in many ways, remains intransigent about making personal changes that might soften his reputation, according to people who have discussed the matter with him. One example: After a parade of Goldman executives and board members — including many of his allies — over the past year asked him to knock off his high-profile DJ gigs until the bank reached firmer footing, he ramped down the bookings. In the past 17 months, he has played only two public gigs, according to Fratto. But Solomon also insisted to those people that he could restart the gigs at any time.
Last month, at Solomon’s suggestion, the Goldman board appointed Thomas K. Montag, a former top executive of Bank of America, as a director. The move shocked many people at Goldman because Montag, who had once worked at the bank, was a polarizing figure whose demanding ways were increasingly out of touch with a changing Wall Street.
Montag didn’t respond to a request for comment.
Among those whom Solomon didn’t consult on the hire: Blankfein, who had passed Montag over for a promotion before his exit from Goldman two decades earlier.
(This article originally appeared in The New York Times)
