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Goldman Sachs chief executive David Solomon is facing an internal backlash and negative publicity but has for now retained the backing of the Wall Street bank’s directors and some of its top shareholders.
Solomon is contending with the most challenging period of his nearly five-year tenure as CEO, with the past 12 months punctuated by falling profits, sagging morale and unflattering press coverage — including a damaging story this month in New York Magazine that asked if he was “too big a jerk” to run the bank.
The brutal profile was one of a series of recent news articles that has highlighted strains inside Goldman following a disappointing bonus round, the departure of several top bankers, and an aversion in some quarters to Solomon’s blunt leadership style.
The dissent in the ranks and media coverage is expected to be discussed at a board meeting next month, according to a person briefed on the matter.
However, people familiar with the thinking of several members of the board, which recently held a summer meeting in India, said they had so far been supportive of Solomon and had taken the view they should not be swayed by what they see as external noise.
“They feel most of this stuff is unfair to what the reality is,” said one person familiar with the views of these board members.
Solomon chairs Goldman’s 13-person board of directors. One person who speaks to several of its members described them as “by and large a patient group”.
“They consider themselves a group that is not unduly swayed by public pressure,” the person said. “The question is if in some cases they’ve been too patient and too willing to give the executive team the benefit of the doubt.”
That patience has found support among some of the bank’s biggest stockholders. “While David may be unpopular [among staff], he’s done a solid job as CEO for the shareholders,” said one top-10 shareholder.
The shareholder jokingly compared the employee rebellion to the Sendero Luminoso — the Maoist guerrilla group that terrorised Peru for decades before fading away — and predicted it “makes a lot of noise [and] peters out eventually, assuming the bank continues to perform solidly”.
“Obviously he’s not going to be a jerk to the investors. They’ve been much more proactive in talking to investors than in the past,” a second top-10 investor said.
“It is always better to have transparency, because you would rather trust the numbers than someone’s word.”
Their backing is a reflection of Solomon’s efforts to court investors in a sharp break with the strategy of his predecessors, who were criticised for an opaque approach not befitting a large public company. This has included hosting the bank’s first investor day and having more regular shareholder meetings.
The second shareholder was forgiving of what is widely seen as Solomon’s biggest strategic mistake — an ill-fated foray into retail banking that started under previous CEO Lloyd Blankfein. Solomon initially embraced the consumer push before last year making a decision to significantly shrink the business.
“It was poor execution, but I give him credit for admitting the mistake,” the second shareholder said.
Goldman Sachs declined to comment.
Earlier this year, the Financial Times reported on growing unrest inside Goldman around large-scale lay-offs and low pay. Negative media coverage became so serious that Solomon told a private gathering of Goldman’s top executives in February that the number of leaks to the media was damaging the bank, the FT reported.
“Where it’s a consistent series of articles and the theme is similar, it’s a red flag to a board that they’re going to have to dig deeper,” said Charles Elson, director at the University of Delaware’s John L Weinberg Center for Corporate Governance.
“You can’t make a decision based on a series of newspaper stories, but a series of newspaper stories puts you on notice that something may be wrong.”