Current partners are now looking to the 2023 compensation cycle for signs that Solomon still has their interests in mind. If it’s another year like 2022, some people fear there will be another wave of exits. “We think we’re well positioned, and one of the things that gives us such confidence is the feedback from our clients about our offering, the mandates we’re competing for and winning, gives us a lot of comfort that we have something unique that can be powerful and can grow over time,” he said. Nonetheless, the changes Solomon has made have angered many current and former employees, partners and managing directors alike, one of the people said. Nancy Twine founded global haircare products powerhouse Briogeo when she was in her 20s, working full-time at Goldman Sachs, and had no experience in the consumer products or retail industries. She shares her story – and lessons for other entrepreneurs – in a Talks at Goldman Sachs interview.

To that end, Solomon has gone on offense, charging Alison Mass, the chair of investment banking, with leading the office of alumni engagement and winning back the hearts and minds of the partnership. Over the past several months, Mass has hosted numerous dinners and get-togethers for former partners, in places including London, Paris, and Chicago, where Solomon and former CEO and former Treasury Secretary Hank Paulson spoke to a group of ex-partners. The bank is also now selling its GreenSky point-of-sale financing business. Yet the acquisition, which Goldman made in 2021 for $2.2 billion, still rankles Goldmanites. The deal never made sense to many people inside Goldman, especially those in its investment-banking division who had spent their careers advising corporate executives on takeover targets. It was a clear signal to them, in other words, that the way Goldman had traditionally paid its people — for example, by paying investment bankers to maintain relationships even during years when dealmaking was slow — had fundamentally changed.

Hear from three of our senior leaders in Global Banking and Markets, Jim Esposito, Ashok Varadhan and David Ludwig on their thoughts on ever-evolving market conditions.

Last month, Solomon brought a respected former partner, Russell Horwitz, back into the fold by hiring him as the firm’s chief of staff. “It’s kind of embarrassing when you are showing up to a client pitching for M&A business, position yourself as the best M&A advisor, pointing to these credentials, and our own deals have been an absolute mess,” the person said. “The number of jokes clients make, and there is some truth, why hire you to do M&A if you can’t even do your own M&A.” Bloomberg reported last month that Goldman was hiring for several hundred back-office roles to help address the Fed’s concerns, but the people who spoke with Insider said it might take months, if not longer, for Goldman to shake the Fed’s scrutiny.

• The Goldman Sachs Group, Inc. (/sæks/ SAKS) is an American multinational investment bank and financial services company.
• Most notably, our Investment Banking team observed a meaningful sector shift from growth to old economy following a prolonged, post-Covid growth cycle.
• Solomon has begun to reverse the head-count trend, firing 3,200 people earlier this year to bring the increase during his tenure to 21%.
• Several people on the list of former employees of Goldman Sachs have later worked in government positions.
• This issue, which is backed by ultra-risky second-mortgage loans, contains all the elements that facilitated the housing bubble and bust.
• Over the four years through 2022, head count ballooned 33%, to 48,500 from 36,600.

Under Solomon, that model has been turned on its head in favor of delivering return-on-equity targets for investors in a way that made Goldman more like JPMorgan. Some of those who spoke with Insider defended Solomon, pointing out that he had made a lot of mean reversion trading strategy changes in a short amount of time and that some turmoil was to be expected. They didn’t excuse his strategic mistakes but acknowledged that he felt that his mandate would modernize Goldman Sachs in a way that his predecessors didn’t or, perhaps, couldn’t.

Advice to short California bonds underwritten by the firm

There’s no way of fully capturing the reasons behind each and every partner’s departure under Solomon. But put together, the interviews highlighted a few recurring themes, including personnel decisions, pay, and strategy missteps. The executives worked in different parts of the bank, and each had their own motivation for leaving. They’ve since moved to smaller rivals or to clients, or are keeping their next step under wraps. “There’s nothing that’s going on in the context of partner transitions that’s different than any other cycle,” Solomon said earlier this month at an investor conference.

• Solomon, to his credit, according to one person who spoke with Insider, has sought to eliminate red tape wherever he can, for example, by encouraging partners to call or text him directly rather than going through assistants.
• In 2022, Solomon publicly acknowledged that Goldman’s consumer ambitions were costing the company too much money.
• “Those are people in Plano making $100,000 a year, so there is not a lot of variability.”
• “The asset-management business is one where all of these consultants, all of these clients, want longevity,” one former partner said.

“However, when looking back on how the firm has operated since 2019 (Mr. Solomon took the helm in late 2018), we would highlight that a lot has gone right.” Goldman’s stock has gained 94% since the end of 2018, compared with a 79% increase in the S&P 500, Devin Ryan, a JMP analyst, wrote in a September 11 report. To better understand their reasons for leaving, Insider set out to gather the perspectives of former partners. Interviews with six of them who have left over the past year or so, as well as with one former managing director, shed fresh light on what’s going on inside Goldman, and why so many are exiting.

In Solomon’s defense

Several people on the list of former employees of Goldman Sachs have later worked in government positions. In addition, former Goldman employees have headed the New York Stock Exchange, the London Stock Exchange Group, the World Bank, and competing banks such as Citigroup and Merrill Lynch. On Wall Street, one thing that can be counted on to ease personnel problems is pay. There’s no question that Solomon disappointed on that front last year as the boom of mergers and acquisitions and initial public offerings dried up. Solomon took a similar managerial approach in naming an inexperienced executive when he selected Stephanie Cohen to corun the firm’s consumer-banking division.

Unauthorized trades by Goldman Sachs trader Matthew Marshall Taylor

Solomon has also wooed partners at his Wooster Street apartment in lower Manhattan. Even so, Solomon apparently believes that if he can win back the former partners, some of the noise will die down, one of the former partners said. “We began narrowing our consumer ambitions nearly a year ago, have been executing on that strategy ever since, and the market has reacted positively,” he said.

En defensa de Solomon

The average tenure from executives once they make partner has increased from 6.2 years to 8.3 years, Goldman says. After a muted start to dealmaking in Q (-45% YoY), M&A activity steadily improved in Q2 as the macro environment stabilized and the financing markets opened, fueling increased momentum across industries and a kick-start to sponsor activity. With the stabilization of the challenging macro environment and opening of financing markets, some industries experienced a surge in M&A momentum. Most notably, our Investment Banking team observed a meaningful sector shift from growth to old economy following a prolonged, post-Covid growth cycle. Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year. We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm – and this one’s pretty bad.

Subprime mortgage crisis: 2007–2008

The money Goldman had set aside for compensation and benefits heading into the fourth quarter was over $3 billion less than in the prior year. Though partners were long accustomed to working from the bottom up to figure out compensation levels, Solomon and Waldron last year imposed top-down figures that suggested they had little understanding of what each desk or business was paying its people, the people said. best esg stocks When both men struggled, senior partners left, and Goldman stumbled in its efforts to wind down its balance-sheet investments. Yet the appointments have had destabilizing effects on various teams and contributed to the turmoil, some of the people said. Managers below them in the division have had to spend time on backfilling positions or calming anxieties when they could be focused on developing new business.

“It was a massive ballooning of head count to support the consumer and tech build-out,” one of the people said, citing Goldman’s expansion in lower-cost locations such as Texas. “Those are people in Plano making $100,000 a year, so there is not a lot of variability.” “A decade-high decline in comp in 2022 probably caused a degree of extra concern on the part of some employees,” Mayo wrote in his September 18 report. He added that he worried that Goldman “could feel a need to transfer more wealth from shareholders to employees to placate any potential situation.”

“And David doesn’t want to acknowledge it’s all driven by the consumer business.” Solomon has begun to reverse the head-count trend, firing 3,200 people earlier this year to bring the increase during his tenure to 21%. What’s not in dispute is that Solomon and Waldron have less flexibility when it comes to paying people because of how large Goldman’s staff has become. The discomfort what is fading started about midyear, when Solomon and Waldron started communicating compensation levels to managers in a way that made many people believe that something might have changed about their approach, four of the people said. “We think it is also fair to criticize certain aspects of management and its decisions, including Mr. Solomon, as that comes with the territory,” Ryan wrote.

While most banks face regular scrutiny from their regulators, some of the people said the focus on Goldman is at least partly driven by Solomon’s headlong push into consumer banking, a highly regulated industry. Many of the people who spoke with Insider pointed to the asset- and wealth-management division as a prime example of a unit that had suffered from Solomon’s unorthodox leadership choices. One former partner who spoke with Insider said that in calling on clients, people had had to answer for Goldman’s consumer-banking missteps. But for investment bankers, traders, and portfolio managers who like to do deals, their reality is that a significantly larger firm is in danger of becoming unwieldy. Partners’ roles are now taken up with more paperwork than some of them would like, three of the people said.

Over the four years through 2022, head count ballooned 33%, to 48,500 from 36,600. Many people who have been hired in technology or consumer-banking roles get a higher percentage of their compensation in base salary. That’s the opposite for investment bankers and traders, who get a larger portion of their compensation in variable bonuses. Even Nachmann, known internally for his operational chops, is a stranger to the world of asset management, having spent most of his career as a banker, and then the past three years in the markets division.