(Bloomberg) — The Goldman Sachs Gulfstream descended into the sun-kissed Bahamas that Friday with a familiar passenger aboard: David Solomon.
It was the final days of February, and Solomon, the chief executive officer of Goldman Sachs Group Inc., had booked another weekend getaway on the new jet — his seventh in as many weeks.
Behind him in New York, the bank’s workforce was left buzzing over his public bashing of work from home, an arrangement he labeled an “aberration” that needs to be fixed. The remarks capped months of grousing to lieutenants about his perception that for some employees it’s more home than work.
In many ways, it should all be sunny at Goldman Sachs: Its Wall Street businesses are booming, the stock is on a tear and the bank finally put to rest the 1MDB scandal that dogged it for six years. Instead, the firm is riveted by palace intrigue over executive defections, bristling over the use of company jets for personal trips and debating how flexible the workplace will be after Covid subsides.
The line through it all is Solomon, who took the helm over two years ago, casting himself as a more modern CEO. He loosened Goldman’s dress code and conspicuously kept his kitesurfing, disc-jockey pastimes.
Yet there’s also the ethos of a corporate boss whose career took root at Michael Milken’s ruthlessly commercial 1980s Drexel operation and later Bear Stearns. Solomon is known for working relentlessly and for an abrasive style, which has rubbed raw at times during the virus outbreak as he’s shown annoyance with a scattered workforce.
“David has been running the firm from our headquarters at 200 West Street since the pandemic hit hard last March, and the results speak for themselves,” said Goldman spokesperson Jake Siewert.
The pandemic unleashed a windfall for Wall Street and the firm in particular as clients rushed to make bets or raise capital to weather the crisis. Goldman’s revenue jumped 22% last year to $44.6 billion, the highest in more than a decade. The stock doubled in the past 12 months, trailing only Morgan Stanley in its peer group.
When the board ended CEO Lloyd Blankfein’s 12-year reign in 2018, it swapped the former trader’s affability for the investment banker’s more exacting approach. Solomon winnowed the bank’s fleet of prestigious partners and took a hard line on costs.
“This is the first management team in a long time that actually pays attention to the shareholder,” said John Thornton, a former Goldman president.
But a year into the pandemic, Goldman Sachs’s bulging profits are accompanied by signs of internal strain. Three business heads — investment-bank boss Gregg Lemkau, consumer-bank chief Omer Ismail and asset-management head Eric Lane — made surprise departures in recent months. The trio were part of the management team that Solomon had shaped.
Those defections and others are now stirring debate at Goldman over the CEO’s leadership and whether something fundamental is changing at the elite firm long renowned for discretion and loyalty.
Interviews with two dozen current and former senior executives found veterans are frustrated. As subordinates contend with the rigors of pandemic life, the boss has risked appearing out of touch — pressing deputies to join him at the office but also toggling to the Hamptons and taking the company-owned aircraft for frequent getaways.
An executive jet might seem normal on Wall Street, but Goldman long made a point of not buying one, worried the extravagance could invite public scorn.
Then came a 2019 incident in which Goldman power broker John Rogers and a notably miffed Solomon logged in to an internal Goldman meeting from an Anchorage hotel, according to a participant. Their NetJets plane had broken down on an Alaskan pit-stop en route to meetings in Asia and they were left waiting for a replacement ride. It wasn’t the first time Solomon was stranded because of problems with NetJets, a fractional-ownership travel venture owned by Warren Buffett’s Berkshire Hathaway.
Goldman got its own Gulfstreams in August, with aviation’s equivalent of vanity plates. The customized tail numbers, featuring the letters WS, are an ode to Wall Street and the firm’s West Street home.
The planes have been used for business, such as scouting office locations in Florida and Texas. They’ve also served as pandemic vacation ferries, making almost a dozen getaways — mostly to the Bahamas, but also locales in the Caribbean and Montana.
“It certainly looks terrible,” said Nell Minow, who advises institutional investors on corporate governance issues as vice chair at ValueEdge Advisors. “There is a Marie Antoinette aspect to it.”
Goldman policy is to limit personal use of aircraft and require reimbursement, according to a filing. The board of a publicly traded company shouldn’t let the CEO use its resources for personal benefit, Minow said. Bill George, a former Goldman Sachs board member, disagrees.
“Bravo if he’s going off to the Bahamas for the weekend,” George said in an interview from St. Thomas. “I am from the work-hard, play-hard culture. I bet you dollars to doughnuts, he’s working the phones and talking to clients while in the Bahamas.”
Behind the scenes, the use of the jets has been a source of consternation within the firm’s upper rungs.
Rogers, the bank’s chief of staff, has expressed concern that their purchase could sully Goldman’s reputation, people familiar with the matter said. There’s also been hand-wringing in what’s known as Goldman’s executive office about their personal use. Eileen Dillon and Beverly O’Toole, two executives in that department, participated in discussions on policies for the planes, mapping out a detailed reimbursement plan to stave off any criticism.
“When he’s away for a weekend, David continues to work, pays for his travel, follows Covid protocols and is back in the office first thing on a Monday morning,” said Siewert, the company spokesperson.
Few things annoyed Solomon more last year than an encounter with a junior employee in the Hamptons. The Goldman Sachs boss has told lieutenants how the underling walked up at a restaurant, introduced himself and pointed to associates with him — in the middle of a workday.
The tale has become the CEO’s go-to anecdote when he vents about his mostly-empty offices: proof that remote work has run amok.
Some who’ve heard the story note the apparent disconnect. The boss is perturbed by bumping into staff while he himself was spending extended summer weekends in the Hamptons at a luxe seaside rental. Solomon’s time there even made national news after he deejayed a concert where attendees flouted social-distancing guidelines, leaving New York state officials fuming.
As early as July, Solomon sought to make a big push to bring back more people to offices but relented after executives around him intervened. In private conversations, Solomon bemoaned that it was politically incorrect to say people need to return to work. He groused about a drop in innovation and the decay of social connections because of the damage done from working at home.
George, who spent 16 years on Goldman’s board, said it’s ultimately up to the CEO to decide how things should be run. “He feels strongly about being in-person,” he said of his chats with Solomon. “Goldman has that big, beautiful office in the lower west side, and I know he would like to see it buzzing.”
Solomon made that known at a Feb. 24 conference. “This is not ideal for us and it’s not a new normal,” he said. “It’s an aberration that we are going to correct as quickly as possible.”
Soon after the remarks, a former senior Goldman executive’s phone began ringing. His longtime colleagues at the bank were looking for a confidant to vent their own frustrations over Solomon’s tone.
Solomon is a rare executive atop Goldman who already had a thriving career before he made his way to the Wall Street giant in 1999. Unlike predecessors, he’s less attached to the Goldman halo and has spent his time running the once-famed partnership more like a regular corporation — less fraternal and more commercial.
But that can also weaken loyalty. Goldman bankers always have attractive job prospects elsewhere, and opportunities are particularly numerous now.
When Solomon rose to the top, he quickly made a flurry of leadership shuffles, leaving only one major division head at the time, Ashok Varadhan, in the same post now. Then a few months ago, even members of the senior management team that Solomon built began leaving.
Lemkau stunned Wall Street late last year by jumping to Michael Dell’s investment firm. Ismail and a deputy left to help Walmart Inc. build a financial venture.
When Lane agreed to join Tiger Global Management, he informed Solomon of his plan to go, and the two got into an argument. Once things cooled off, Solomon tried to persuade Lane over dinner to stay. Lane declined.
It isn’t just veterans — even people who made partner in recent years have departed for other jobs. Examples from the class that ascended in 2019 include Earl Hunt, David Stark and Rana Yared.
“In the old days, people would have gasped: ‘Wait, wait, wait a minute, you just won the lottery, you were made a general partner at the firm, and now you are leaving?’” said Janet Hanson, who formed a prominent Goldman alumni network and has been associated with the investment bank for over four decades. “The status of being a partner at the firm is not what it used to be, and I think David Solomon is OK with that.”
Solomon’s blunt style irks colleagues. He’s known to make haranguing phone calls to senior executives when he’s upset over missed business or management moves. Some say the calls sting more than those of his predecessor, Blankfein, who wrapped criticisms in quips. Executives also perceive that Solomon doesn’t like to be challenged publicly, one management committee member said, and some have turned to Chief Financial Officer Stephen Scherr, seen as a unifying figure, as their bridge to communicate with the top brass.
If executives can’t handle candor, “it’s a litmus test of their own character, not a failure of David’s,” said Jeff Sonnenfeld, a professor at Yale School of Management who’s followed Goldman for years. “It’s not intended to be cruel.”
More recently, Solomon’s chief of staff, Ida Hoghooghi, resigned as a managing director, ending more than 16 years at the firm. The post directly under Solomon is prestigious, but one that colleagues have taken to calling the hardest job at the bank. She declined to comment.
Despite rankles, griping and defections, the bottom line at Goldman looks good.
Net income rose 12% to $9.5 billion last year, despite billions in penalties for the 1MDB bribery probes. That helped send Goldman’s market capitalization soaring to $126 billion — up 43% since Solomon took over.
More than 70% of analysts covering the stock recommend investors buy it — the strongest endorsement in 10 years. When Solomon announced full-year results in January, some of those analysts were particularly impressed with the restraint he showed in managing expenses, keeping a lid on employee compensation after the banner year.
Just days before disclosing the numbers, Solomon set out for the first of his spree of weekly getaways. On a Thursday morning, the CEO stepped on to the company’s G-VI on its way to the Caribbean. He celebrated his 59th birthday at an exclusive enclave, surrounded by family, associates and the Barbuda oceanfront’s blush-pink sands.