Receive free Goldman Sachs Group updates

We will send you a myFT daily digest email rounding last Goldman Sachs Group news every morning.

Goldman Sachs CEO David Solomon Faces Internal Backlash and Media Coverage

The Challenges of David Solomon

Goldman Sachs chief executive David Solomon is facing internal backlash and negative publicity, but for now he has retained the backing of Wall Street bank executives and some of its major shareholders.

Solomon is facing the busiest period of his nearly five-year tenure as CEO, with the past 12 months punctuated by declining profits, declining morale and unflattering press coverage, including a damning story this month in New York Magazine asking him if he was “too big a jerk” to run the bank.

The brutal profile was part of a series of recent news articles that highlighted tensions within Goldmann following a disappointing bonus round, the departure of several prominent bankers, and a dislike in some quarters for Solomon’s outspoken leadership style.

The dissent in the ranks and the media coverage are expected to be discussed at a council meeting next month, according to a person familiar with the matter.

However, people familiar with the thinking of several members of the council, which recently held a summer meeting in India, said they have so far supported Solomon and felt they shouldn’t be swayed by what they see as outside noise.

“They feel most of these things are unfair to what the reality is,” said a person familiar with these board members’ views.

Solomon chairs Goldman’s 13-person board of directors. One person speaking to several of its members described them as “generally a patient group.”

“They see themselves as a group that is not unduly influenced by public pressure,” the person said. “The question is whether in some cases they have been too patient and too willing to give the executive team the benefit of the doubt.”

Evidence of Support

That patience has found support among some of the bank’s largest shareholders. “Although David may be unpopular [among staff], he has done a great job as CEO to the shareholders,” said one of the top 10 shareholders.

The shareholder jokingly compared the employee rebellion to the Shining Path — the Maoist guerrilla group that terrorized Peru for decades before dying out — and predicted that “it makes a lot of noise [and] it eventually sells out, assuming the bank continues to perform solidly.”

“Obviously he won’t be an ass to investors. They have been much more proactive in talking to investors than in the past,” said a second top 10 investor.

“It’s always better to have transparency, because you’d rather trust the numbers than someone’s word.”

Strategic Shifts and Shareholder Relations

Their support is a reflection of Solomon’s efforts to woo investors in a sharp break with the strategy of his predecessors, who have been criticized for an opaque approach unsuitable for a large public company. This included hosting the first bank investor day and having more regular shareholder meetings.

The second shareholder has forgiven what is widely considered Solomon’s biggest strategic blunder: an ill-fated foray into retail banking that began under former CEO Lloyd Blankfein. Solomon initially embraced the consumer push before making the decision last year to significantly scale back the business.

“It was bad execution, but I give him credit for admitting the mistake,” said the second shareholder.

Goldman Sachs declined to comment.

The Impact of Negative Media Coverage

Earlier this year, the Financial Times reported growing unrest within Goldman around large-scale layoffs and low wages. The negative media coverage got so bad that Solomon told a private meeting of Goldman’s top executives in February that the number of leaks to the media was hurting the bank, the FT reported.

“Where it’s a coherent series of articles and the theme is similar, it’s a red flag for a board that they’re going to have to dig deeper,” said Charles Elson, director of the John L Weinberg Center for Corporate Governance at the University of Delaware.

“You can’t make a decision based on a series of newspaper articles, but a series of newspaper articles let you know that something might not be right.”

Summary:

In conclusion, Goldman Sachs CEO David Solomon is currently facing internal backlash and negative media coverage. Despite this, he continues to enjoy the support of Wall Street bank executives and major shareholders. The challenges he faces include declining profits, declining morale, and concerns about his outspoken leadership style.

While there are dissenting voices within the ranks and the media coverage has been harsh, there is a prevailing sentiment among some board members and top shareholders that the criticism is unfair and does not reflect the actual reality. Solomon is seen as a proactive CEO who prioritizes transparency and engagement with investors, a departure from the previous approach criticized for its opacity.

One of Solomon’s strategic missteps was the ill-fated foray into retail banking, but he has been credited for admitting the mistake and scaling back the business accordingly. The negative media coverage has prompted the CEO to address the issue internally, acknowledging the impact of leaks to the media on the bank’s reputation and stability. However, it is important for the board to conduct a thorough investigation when faced with a consistent narrative in the media.

Ultimately, the future of David Solomon as CEO of Goldman Sachs remains uncertain, with the dissent, media coverage, and upcoming council meeting all contributing to the ongoing discussions. It is clear that Solomon’s tenure as CEO is at a critical juncture, and the decisions made in the coming months will shape the future direction of the bank.