The Ides of Goldman Sachs and the Fate of David Solomon

Other DJs have been raising the bass throughout the summer season, but David Solomon has been struggling with negative feedback. The New York Times, Wall Street Journal, New York Magazine and The Economist have all piled on, questioning Solomon’s performance in his day job as chief executive officer of Goldman Sachs Group Inc.

The gist is that Goldman Sachs employees don’t like Solomon very much and many are departing the storied firm. Solomon’s waning popularity coincides with declining staff compensation — in 2022, it was down nearly a quarter on the prior year to $312,000 per employee — coupled with accumulated losses linked to his expansion into consumer banking. “You don’t need to be popular to be the CEO of Goldman Sachs,” writes Jen Wieczner at New York magazine. “The only real non-negotiable is that you be skilled at making money.”

Solomon is only the 10th person since Marcus Goldman and his son-in-law Samuel Sachs to run the company, so he doesn’t have a lot of history to draw on. But his predicament isn’t unique. In such a high-profile job, it would be unusual not to come under scrutiny. And he’s hardly the first Goldman Sachs leader to confront internal dissent.

In 1970, Gus Levy was senior partner — this was long before there were public shareholders to worry about — when the firm became embroiled in a crisis following the bankruptcy of Penn Central, the country’s sixth-largest company at the time. Goldman Sachs had reduced its own exposure to the railroad to zero even as it continued selling its short-term debt. When clients found out, they weren’t pleased. The resulting lawsuits threatened to overwhelm the firm.

“Beyond the money, it could cost Levy in loss of authority and strength of leadership,” writes Charles D. Ellis in his 2008 book, The Partnership: The Making of Goldman Sachs. Levy’s predecessor, Sidney Weinberg, harbored some misgivings about Levy, and although he was no longer alive to witness the events, partners close to him could have withdrawn or reduced their crucial support.

In an additional foreshadowing of Solomon’s current situation, Levy’s position wasn’t helped by a sharp downturn in profits. The year 1972 was a record for the firm, much like 2021. The profits in 1972 “caused people to have a very positive feeling,” Robert Rubin, a future senior partner, told author William Cohan. “And then all of a sudden 1973 came and the market peak-to-trough was down 42%, and we really suffered.” “There was no money for bonuses in 1973,” another partner added.