Lloyd Blankfein led the Goldman Sachs Group through the financial crisis, hence, securing not only its survival, but its fame. Now, the new leader has a new challenge: how to keep the Goldman Sachs image in the post-crisis environment, that has changed completely since the crisis time.
Mr. Blanfein will leave his position soon, and this event will mark the start of a new era for the Group, the era of turning from a secretive trading powerhouse into an open entrepreneur environment.
Mr. Solomon will be the next leader of Goldman Sachs. By selecting him for this position, the Goldman accepts the opinion, that the firm should change its attitude and approaches. The new time is coming, and Goldman Sachs should fit in it.
Mr. Solomon has never been a super successful trader, neither he has been a banker, he came to the company as an outside partner and spend almost all his life in one or another managerial position.
Mr. Solomon was not wasting his time. He has already come into the position with an idea of change. He wanted to make the company more organized, more open and more decisive. He came with ideas, that the company found difficult to digest. The strangest thing, however, was even not this, he surprised everybody by demanding a three-year operating budget from the division heads of Goldman.
As well, he proposed an idea to eliminate the Goldman management committee. Its membership increased immensely during the last decades, and this increase was making them less and less efficient. He offered to give the powers to those executives who really run the entire business.
He created a strategy team which task was to look for new ideas. Mr. Solomon gave the initiative to include more women un the senior ranks of the company. And, finally, he planned an investor day, that should take place in 2019, and on this day, he is going to end up with the secrecy status of Goldman Sachs.
During the presidency of Mr. Blankfein, Goldman Sachs became a leader in Wall Street thanks to its strategy that was in the mix of trading, political affairs and prowess, however, that was a solution for the company during the political and financial crisis. Now, time has changed, and the company has to change its values to survive in a completely different world, the world of consumer and commercial banking.
The world turned to tough regulation and strict customer protection policies, which has changed the customer behavior completely. These factors have hit the company very hard. The company works with corporate bonds, oil and interest-rate swaps mostly. But now, it has to look for other ways to get profit. Corporate cash management and consumer banking are the options that are reviewed at the moment. With them, Goldman hopes to become a decent competitor to such Main Street giants like JPMorgan Chase & Co and Citigroup Inc. the new aim is to add 5 billion UDS in the annual revenue, the target is set for 2020, so, the company has to make efforts to look for new options to build the business.
The legend of Goldman success has started openly. When Mr. Blaknfein took the presidential position in 2006, Goldman was still a privately-owned company, and during most of its history, the power belonged rather to the partnership than to a sole leader.
All that time Mr. Blankfein and Mr. Solomon have been working in the neighboring offices in the New York headquarters of Goldman. At that time Mr. Blankfein liked to joke that he was going to die at the desk, but with time, he changed his mind.
Later in spring, Mr. Blankfein announced, that he was going to pass over the position of the company president. As well, he told Mr. Solomon, who was connected from Saudi Arabia, that he might want to stay.
Mr. Solomon appeared in the middle of 1980s, and spent his first years on Wall Street handling junk debts. He was a social planner, his main task was organizing ski trips and summer rental deals in Vermont and the Hamptons for a group of his friends from the college where he studied. But even there, during the trips, he was restless. When his friends used to wake up, they saw him moving the lawn.
After working for a while for Salomon Brothers and bear Stearns, he joined Goldman as a partner. We shall note, that it is very uncommon for an outsider to join such a company at this level.
After he had completed with junk bonds deals, he was in charge of Goldman`s investment banking division. He managed to turn it into a powerful professional force, that now makes revenues higher than any other company on Wall Street.
Mr. Solomon has an outstanding policy of zero bonuses to the 5% of the lower range employees. He was fighting to get back stocks from those bankers who at that time were leaving Goldman to start their own businesses. He was the one who managed to create acorporate lending and debt underwriting businesses. Those were the risky fields that were avoided by Goldman very carefully. And those fields started generating record sums of revenues.
In 2012, he was responsible for the conference planning. The main target of the conference is to discuss the options of support to promising startups. Mr. McDonough, who is now a CEO of a promising and rapidly developing blockchain business, described the impression from Mr. Solomon during the first planning call. “David swoops in like a general, barking orders, assigning responsibilities,” he told. He noted, that Mr. Solomon saw the potential of the idea and just grasped it by bringing intense discipline to it. Mr. McDonough remembers that he was taken aback first, but then, it worked out very finely.
The Builders + Innovators Summit is now a highly attended event, it is rather a must-attend event for startups and promising businesses. As well, this event has become a good income source for the banking business of Goldman Sachs.
When Mr. Solomon has some free time, he likes skiing and going to the seaside. The Bahamas, Baker`s Bay and Aspen are his favorite locations. As well, he continues his DJ activities, which he has started before he came to Goldman. Recently, he has released his first single. This is a kind of remix of song “Don’t Stop” by Fleewtod Mac. You can listen to it on Spotify, the streaming service, it is released under the stage name of Mr. Solomon, D-Sol. And he works with the own business, as well. recently, he opened his third restaurant in New York, called Legacy Records.
His friends call him a “perpetual motion machine”, and for a reason. He is always doing something.
Mr. Blankfein left Goldman in a more stable condition than he found it. Let`s remind, that he came to the presidential position, when Goldman was leading the derivatives-trading boom, when the first signs of the crisis appeared. He avoided the losses that could amount to billions of dollars, and he was the one who made Goldman hit the competitors. Because of these events, he earned himself the image of the main villain, the image, he has been trying to get rid of for years.
Goldman Sachs spent huge sums, millions of dollars, for providing sponsorship to small businesses and businesses led by females. Like this, Mr. Blankfein was trying to regain the goodwill of Washington.
When he decided to resign, it was not clear who would come in his place. Goldman insiders believed, it would be Mr. Schwartz, who was the chief financial officer during the presidency of Mr. Blaknfein. He was the person was by the president all those years. He competed for the presidency for 15 months, but later, after the decision had been made, Mr. Solomon shared, that he believed, that Mr. Schwartz was going to lose. And Mr. Schwartz lost.
Mr. Solomon was not devoted to Goldman all those years. He had considered even leaving the company, for a chance to run the Casino empire of Sheldon Adelson. This offer came in 2014. But in the end, Mr. Solomon decided for Goldman. He had one more chance to leave for a managerial position at TPG, a private-equity firm, but decided for Goldman again. And it was worth that, as we can see now. He got one of the most desired jobs in the finance field. Doesn’t matter what issues and challenged Goldman Sachs has, it is the symbol of power on Wall Street and one of the most influential financial companies in the world. And those men who have run the company have had always main voices in the industry. By the way, Goldman Sachs has never had a woman as a CEO of the company.
Mr. Solomon didn’t think too long when deciding about removing the oldest traditions of the company. He organized annual investor days for big companies, such as JPMorgan and Walmart Inc. With this, he gave an opportunity to shareholders to meet with analysts and executives. Goldman Sachs had never had one before.
Normally, Goldman used to prepare yearly budgets, but Mr. Solomon insisted on more advance planning. He asked for budgets and cost projections for three years in advance, including the hiring plans and initiatives for client coverage.
He organized weekly meetings with the management committee of Goldman. They are discussing current issues in Monday. This is also a step away from the policy of a private firm, when a small group makes decisions.
During the presidency of Mr.Blankfein, the management committee has grown to about 30 members, and each of them was running one of the main business lines of the company. So, they couldn’t know about the complex situation outside of their area. That’s why, such meetings were not as efficient as they had to be.
Some critics insist, that Mr. Blankfein used those meetings not so much for discussing important decisions, but rather to send signals to regulators and soothe egos of the managers. With Mr. Solomon, the situation has changed, and during the meetings, the every day affairs of the company are discussed.
Mr. Solomon also created a smaller group of top managers and organized separate meetings for them. Those who are responsible for nonrevenue affairs, such as human resources, for example, have to participate in broader meetings.
This is the echo of the changes he made when he was the head of the investment-banking division. He believed, that his leadership was too lumbering, so, he created a group of trusted executives that would speed up decision making.
When the question about the partner class arose, Mr. Solomon gave the idea that there shall be a smaller number of partners, preferably under 100. Moreover, their allotment should change. The CEO insists that they should be rather bankers, traders, other kind of revenue-generating employees. There will be less employees responsible for functions, like operations division.
Mr. Solomon believes as well, that creating diversity is one of the main tasks of the company. There are few females in the top management of the company, and Mr. Solomon is going to change that. Now, about 48% college graduates that will join Goldman, are females, and by 2012, the company has to achieve one more of its goals: the parity.
He promoted Beth Hammack to treasurer position, despite the objections from the side of Mr. Blankfein. The former CEO insisted, that Ms. Hamamsck was more valuable in the trading field, more specifically, on the trading floor. However, some specialists believed, that she had a much greater potential. But Mr. Solomon was consistent in his decision. He claimed, that her promotion would show the world, that the company is serious about the women rights and closing the gender gap. He told, that he already had difficulties explaining why their intentions regarding females in the top positions were just intentions for then. So, he told, he had to make a move.