- Rupert Murdoch stepped down as chair of Fox and News Corp.
- The Bank of England held UK interest rates at 5.25 per cent (more below)
- Russia blocked exports of petrol and diesel except to Armenia, Belarus, Kazakhstan and Kyrgyzstan.
David Solomon, the CEO of Goldman Sachs, has faced a barrage of negative media coverage for his leadership style and strategic hiccups. Ahead of a tough quarter, he’s apparently decided to take a “hiatus” from his hobby moonlighting as DJ D-Sol.
So what? Goldman dominated global investment banking for two decades. Its people worked harder, innovated more and made more money than anyone else – until the party stopped last year. The board can’t ignore the cacophony of bad press surrounding Solomon; Goldman’s reputation as the biggest dealmaker on Wall Street is at stake.
An analyst who spoke with lead director Adebayo Ogunlesi says he’s not leaving “anytime soon”. That said, a lot depends on strong results next month.
“I think that if the fundamentals of the business were truly bad, the board would be taking a different position,” says a former partner who spent over a decade at the firm. “Many of them were chosen for their particular ability to support management.” That support is being tested by Solomon’s approach to:
Leadership. The scale of anonymous briefings against the CEO is conspicuous. “He’s a prick,” one long-time colleague told NY Magazine in a scathing exposé. Another piece describes mutinous talk among partners at a dinner this summer, openly discussing Solomon’s future over $180 porterhouse steak. He’s since asked the partnership to watch what they say to the press. But that leaves questions for the board: how much is this a measure of Solomon’s failure to secure goodwill, internally and externally? Should the board be speaking up for him? Or is it up to his media operation to do a better job?
Strategy. A botched foray into consumer banking was the brainchild of Solomon’s predecessor, Lloyd Blankfein, but Solomon’s been around long enough now that he owns it. GreenSky, bought last year for $2.24 billion, is expected to sell for less than a third as much. Partners lobbied John Waldron, Solomon’s number two, to drop the project early on, saying it was diverting resources from the more profitable businesses of asset management, investment banking and trading. Solomon – and the board – could have listened sooner.
People. More than 200 partners have left the firm since Solomon took over. Goldman says that’s “absolutely typical” over a five-year period – and churn does happen. But the quality of recent departures is striking. Heavyweights like Julian Salisbury and Lisa Opoku have gone to smaller firms, despite the tough environment for raising capital. As one former partner puts it: “why would you give up the security of a nice warm bank to put together presentations and go begging?”
Performance. For the first time in five years Goldman has slipped behind JP Morgan in the M&A league tables – traditionally a source of great pride and pressure for the bank. Q2 was brutal: profits plunged 58 per cent year-on-year as dealmaking dried up. This autumn a lot is at stake in the bank’s advisory role in three tech IPOs: Arm, Instacart and Klaviyo.
Workplace culture. In June, Goldman announced the appointment to the board of Tom Montag, a Wall Street veteran who stepped down as Bank of America’s number two in 2021 after criticism of his hard-charging style (he was known for making a “can’t be bothered list” that marked staff for pay cuts). He’s understood to be close to directors John Rogers and David Viniar, but less so to Solomon. He’s regarded by some insiders as an insensitive choice given the cultural tensions on Solomon’s watch. During his time in charge the bank has
- paid $215 million to settle a gender bias lawsuit in which 2,800 women accused Goldman of hindering their career advancement and paying them less than their male colleagues;
- faced claims from junior analysts who said they endured 95-hour workweeks, sleep deprivation and “excessive monitoring or micromanagement”; and
- hit back against a lawsuit filed by a former head of recruitment which alleges a “culture of bullying” at its London office that caused staff to “sob” through meetings. A spokesperson said Goldman believed the claims were “completely without merit”.
SVB. The Fed and the SEC are investigating two deals Goldman struck with Silicon Valley Bank before it collapsed. Because of its dual role as buyer of SVB’s securities portfolio and adviser on the subsequent capital raise, the bank is facing questions over whether its investment banking and trading divisions were in cahoots. Senator Elizabeth Warren has accused Goldman of netting an estimated $100 million as market turmoil drove up the value of discounted SVB bonds. Goldman says it’s cooperating with authorities.
A bumper quarter could silence the chatter, but the odds are stacked against Solomon. The cascade of questions about his leadership have put the board in a tricky position and damaged perceptions of Goldman among clients. Ditching the DJ decks won’t cut it.
