Goldman Sachs is about to post its worst results in years

I’ve never cared about Solomon’s side hustle as a DJ, or found the corporate jets especially scandalous. To the charge that Solomon is dictatorial and a bit of a cypher — so what? Neither is a crime, and both can be assets in corporate settings.

But look at the business.

A CEO’s job is allocating resources: capital, people, and intangibles like brand and reputation. Bosses have to spend money on the right things, put the right people in the right seats, and sketch out a vision that brings those people along and leaves the place stronger than they found it. Five years in, Solomon has struggled to do any of that.

The tumult is starting to weigh on the business. Bankers say calls with clients increasingly start with questions about the negative headlines coming out of the firm. Goldman barely kept its M&A crown for the first half of the year, according to Refinitiv, sliding back on top over JPMorgan on the last day of the quarter — an unnerving near-miss at a firm that treats its No. 1 ranking as sacred.

Goldman’s own acquisitions have ranged from middling (United Capital) to disastrous (GreenSky). Solomon has overpaid for things he shouldn’t have (again, GreenSky) and missed out on things that would have moved the needle (Global Shares, which went to JPMorgan, was the last remaining on-ramp into the business of managing employee stock plans, an unflashy but linchpin offering for any firm with wealth-management ambitions).

Solomon approved a brand refresh that would have dropped Goldman’s iconic blue box, at a cost of tens of millions of dollars, people familiar with the matter said. The effort has been pared, a victim of $1 billion in cost cuts targeted for this year. A sponsorship of McLaren survives.

Few of Solomon’s senior personnel moves, whose animating principle has seemed to be there’s no problem an investment banker can’t fix, have worked out.

It’s true that bankers, Solomon’s side of the house, had been in the wilderness for too long under his predecessor, Lloyd Blankfein, a trader. And one of Solomon’s priorities was revamping how Goldman covered its clients; bankers might be better suited than traders, who don’t have clients but rather counterparties. But the track record is poor.

Stephanie Cohen, an M&A banker, was put in charge of consumer banking. She’s now on leave as Goldman gets out of that business. Luke Sarsfield, who had previously counseled healthcare companies on deals, was put in charge of asset management. He was out of that job a few months later.

His co-head, Julian Salisbury, made his name in a small, secretive group that invested Goldman’s own capital. Solomon put him in charge of a giant division that was actively tilting away from that model, toward managing money for pension funds and other clients. He was demoted last year, to chief investment officer.

Another investment banker, Matt Gibson, was elevated to run sales in that business, where he has sparred repeatedly with his co-head, Chris Kojima, people familiar with the matter said. (Fratto said the firm is “on or ahead of target” in its fundraising goals.)

The departure of a string of senior women — Katie Koch, Heather Miner, Margaret Anadu, Dina Powell, Jo Natauri — is starting to harden into a narrative about diversity, a key focus of Solomon when he was campaigning for the job.

Waldron overruled the search committee tasked with hiring a new head of HR in 2020, people familiar with the process said, rejecting their candidate and instead selecting an executive who oversaw talent for Johnson & Johnson’s supply chain business. Bentley de Beyer dismantled and rebuilt Goldman’s review and promotion system in ways that bothered many. He lasted two years, and the system went back to what it had been before.

Say what you will about Goldman, it’s always been pretty well run. Its lingering partnership culture had its shortcomings, which I’ve written about, but it bred a discipline, left over from the days when partners’ capital was at risk.

Solomon moved to corporatize Goldman in ways I’ve mostly defended as long overdue. That meant sharing more of the spoils with shareholders than with employees, and soliciting less input — and tolerating less dissent — from its 400-odd partners.

But he also imported corporate bloat, fueling a sense that nobody has been minding the store. Headcount grew from 39,800 when Solomon took over in 2018 to nearly 50,000 at the peak, before January’s layoffs. Another round of firings last month cut a few hundred expensive bankers, and another round is planned for August or September, concentrated in asset management.

The second quarter is going to be a bad one and unless the dealmaking environment improves by September, so is the third. It’s not inconceivable that Goldman shares dip under $300 this year, at which point Solomon’s armor starts to chip.

Defending the firm in recent weeks, Goldman’s communications chief Tony Fratto has pointed to the stock price, which is holding steady in the low to mid $300 range. That’s true, and Solomon has steadily grown book value.

Goldman trades at a widening discount to its closest peer, Morgan Stanley, whose CEO, James Gorman, is in the final year of a model tenure. Morgan Stanley’s acquisitions have paid for themselves and the firm is now Wall Street’s steadiest performer, largely drama-free in both its financial results and its internal workings.

• Goldman is looking for a way out of its credit-card partnership with Apple, which as recently as a few months ago held up as a win in an otherwise disastrous push onto Main Street, WSJ reports.