By Liz Hoffman
The game is on at Goldman Sachs Group Inc.
The likely departure of No. 2 Gary Cohn, who appears set to join
Donald Trump's administration as senior economic adviser , sets off
a new round of C-suite jockeying at Goldman, where the decadelong
tenure of Chief Executive Lloyd Blankfein has created a younger
generation of executives anxious to advance.
Mr. Cohn holds the title of president and chief operating
officer at the Wall Street powerhouse. His duties would likely be
split among two executives, The Wall Street Journal has reported.
Goldman has a history of management double-acts, which reflects
either a collaborative fraternity stemming from its days as a
private partnership or a cage fight designed to produce the fittest
leader, depending on who you ask in the firm.
The likeliest contenders, according to people familiar with the
matter, are investment-banking co-chief David Solomon and Chief
Financial Officer Harvey Schwartz. Either would effectively be
vying for the role of Mr. Blankfein's heir apparent.
A Goldman spokesman declined to comment, though the firm has
said publicly in the past that it has a deep bench of
executives.
Mr. Solomon, 53 years old, is the longest-serving head of a
major business line at Goldman. He has spent a decade atop the
firm's investment-banking arm, which generates half the revenue of
Goldman's trading arm, but is twice as profitable. There, he has
protected the bank's position as the leading merger adviser and
pushed it to grow bigger in corporate lending.
A former junk-bond salesman who joined Goldman as a rare lateral
partner in 1999 from Bear Stearns, he is respected, if not
universally loved, inside the firm. With a gravelly voice and an
imperial management style, he leads by fiat and occasionally fear,
and has often clashed with Mr. Cohn in the executive office, people
familiar with the matter say.
But he also spearheaded the firm's effort to lighten the
workload for Goldman's junior bankers, which has improved retention
and morale.
Mr. Solomon is known less as a superstar deal maker than a
powerful client advocate, able to marshal resources from various
departments -- in Wall Street parlance, "deliver the firm." Without
an industry specialty, his client relationships have gravitated
toward self-made moguls such as Aubrey McClendon, the natural-gas
wildcatter who died earlier this year, and private-equity
founders.
Mr. Schwartz, 52 years old, has been CFO since 2013, when he
replaced David Viniar, Goldman's long-serving finance chief. Like
Messrs. Blankfein and Cohn, he came up through the firm's
securities arm, though as a salesman rather than a trader.
He lacks the white-shoe pedigree of many Goldman executives. A
Rutgers graduate, he began his finance career far from Wall
Street's elite, first at J.B. Hanauer & Co. and then First
Interregional Equity Corp., a municipal bond-trading shop that
later folded.
In 1997, Mr. Schwartz joined Goldman's commodities unit -- the
same division that gave Messrs. Blankfein and Cohn their start. He
rose through its ranks, running the firm's global sales effort
before taking the helm of the securities division in 2008, just as
the financial crisis was unfolding. His five years in that role saw
Goldman's trading arm shackled by new regulation.
To some inside the bank, Mr. Schwartz embodies the Darwinian
ethos that drove Goldman's trading desk in the 2000s, but drew
criticism in the wake of the crisis for putting the firm's
interests ahead of clients. Even into his tenure as CFO, he
referred to clients as "counterparties," which struck some
colleagues as reminiscent of the firm's precrisis mind-set.
The top roles at Goldman have tended to swing between bankers
and traders. Power typically follows whichever business is on the
upswing.
Mr. Blankfein was elevated after a stint atop the trading
division in the early 2000s when profits soared, and at a time when
investment-banking revenues were tailing off following the dot-com
bust. His predecessor, Henry Paulson, was an investment banker, and
ascended to the throne in 1999 after mounting losses in Goldman's
trading division.
Investment banking has ruled the roost over the past few years,
aided by a historic M&A boom and new regulations that crimped
trading profits. But there are signs the merger rally is losing
steam, and the specter of deregulation raised by Mr. Trump's
election could re-energize Wall Street trading desks.
There are also emerging power centers at Goldman. One-quarter of
the bank's 35,000 employees are coders and engineers who report to
Chief Technology Officer R. Martin Chavez, a longtime associate of
Mr. Blankfein.
And Goldman's investment-management division, which oversees
money for pension funds and other big investors, now accounts for
nearly a fifth of the firm's revenue. But its executives are seen
as longer shots for a major promotion: Tim O'Neill, 63 years old,
is a contemporary of Mr. Blankfein, making him an unlikely
successor, and co-head Eric Lane is still in his early 40s.
The elevation of senior executives to fill Mr. Cohn's role could
create room for promotions lower down. The lack of turnover among
Mr. Blankfein's inner circle has sparked grumbling about a talent
bottleneck and has fueled some partner departures, current and
former executives say.
Should Goldman need to appoint a new CFO, many expect Stephen
Scherr, who runs Goldman's nascent consumer-banking effort, or
Pablo Salame, a co-head of the securities division, to get the nod.
Both had been viewed as likely candidates when the position was
last open.
Candidates to replace Mr. Solomon include Marc Nachmann, who
oversees Goldman's financing business, and Gregg Lemkau, a merger
banker who has worked on deals including Verizon Communications
Inc.'s purchase of Yahoo Inc. and the split-up of Hewlett-Packard
Inc.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
December 09, 2016 15:28 ET (20:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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