Business

Goldman hit by senior departures as lower pay and overhaul take toll

Some insiders fear it could take years to replace top-tier bankers

Goldman Sachs has lost a slew of top partners in recent months. Photograph: Brendan McDermid/Reuters

Thu Aug 3 2023 - 13:51

When a memo landed in Goldman Sachs inboxes earlier this year announcing that Mike Koester was leaving the firm, there were audible gasps at the bank’s headquarters in lower Manhattan.

The departure of the 25-year Goldman veteran, co-president of the group’s alternative investments business, stunned staff, with one employee describing Koester as a “beloved” figure inside the bank. “If you don’t have aspirational mentors, it becomes difficult to stay,” they added.

It is one of several recent high-profile exits from Goldman, which have added to chief executive David Solomon’s struggles in the past 12 months as he pares back an expensive foray into consumer banking at a time when the firm’s financial performance is still lagging behind rivals.

Some current and former Goldman employees say the turnover is in part due to lower pay at the bank in 2022, when it had to cover losses at its consumer lending business. Others blame a reorganisation late last year, Solomon’s second such overhaul since he took the helm less than five years ago. And many fear that 2023 will be another disappointing year for pay given the slowdown in Goldman’s core investment banking and trading businesses.

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“Goldman people, senior people, are more receptive than ever to take a call from me,” said one Wall Street headhunter.

Besides Koester, who left in April and plans to start his own venture in the private markets, other notable departures have included Julian Salisbury, chief investment officer for asset and wealth management, Dina Powell, head of Goldman’s business covering sovereign wealth funds, and Joe Montesano, head of equity trading for the Americas.

This week, three more partners confirmed they were leaving Goldman. On Monday, two of the bank’s senior lawyers decamped for Citadel. David Thomas is becoming head of legal for global markets at Citadel’s hedge fund unit while David Rusoff is joining Citadel’s market-making arm as chief legal officer.

Then on Tuesday, Goldman told employees that Lisa Opoku, a partner since 2012, was heading for the exit. She had been running the bank’s wealth management business that caters to current and retired partners.

“It’s hard to watch, really,” said one former Goldman banker. “It used to be a place that really specialised in training people, and training them to be leaders. It’s just not the same place any more.”

Goldman has pointed to longer tenure for current partners across the firm and argued that the bank has intermittently gone through periods of higher turnover before, including in 2011 following the financial crisis and in 1998 when the firm delayed an initial public offering.

“We have incredibly talented people who are the best at what they do, and we are never surprised when after 20 years, they go on to have big roles at other companies,” said Goldman spokesman Tony Fratto.

He added: “This is history repeating itself, it’s a natural cycle – and it creates a powerful ecosystem where former colleagues become loyal clients.”

But others at Goldman fear the loss of knowledge could take years to replace. It is putting to the test a refrain inside the firm that no matter who leaves, gaps are filled quickly and there are enough hungry, smart go-getters to ensure the bank does not miss a beat.

“The joke at Goldman is there’s no place that can regenerate itself faster than Goldman Sachs,” said one banker who left last year.

After consumer banking, Solomon is doubling down on asset and wealth management. The bank is hoping that growth in those businesses, which investors view as more stable, can complement its more volatile investment banking and trading division. A similar strategy has proved popular among investors in long-time rival Morgan Stanley.

Ahead of the announcement of Salisbury’s departure, Goldman called investors in its funds to play down the impact for the asset management business, which has raised more than $200 billion in gross third-party funds since 2020.

“They understand, but it’s not a good look for asset management,” said one person familiar with the discussions.

Goldman said such calls are standard practice whenever a senior asset management executive departs, and that the attrition rate among its investment professionals is the lowest it has been in years.

Part of Goldman’s success is often attributed to its large and influential alumni network – employees often become clients when they leave to run companies, work at hedge funds or join private equity firms.

One of Solomon’s priorities has been to cultivate that network in a more co-ordinated way, including offering former partners exclusive access to an investment vehicle that will put money into the firm’s private market funds.

Goldman’s upper echelon of roughly 425 partners – historically one of the top titles on Wall Street – are selected every two years and undergo regular churn to make room for new talent.

“We work to keep the partnership at around the same size and so 80 partners leave about every two years,” Fratto said. “Given the changes we have made to set the business up for long-term success, some turnover is expected but not anything that hasn’t occurred in prior cycles.”

Still, some current and former Goldman employees think the departures in recent years – and in particular the quality of people leaving – are notable compared to the historical norm.

One senior Goldman executive said this week that the recent slew of departures had for the first time made them consider being more receptive to incoming calls from prospective employers.

The early years of Solomon’s tenure were also marked by several high-profile departures, including co-head of investment banking Gregg Lemkau, who joined Michael Dell’s investment firm, co-head of the securities division Marty Chavez and chief financial officer Stephen Scherr who later became chief executive of Hertz.

Many departing employees are joining the Goldman diaspora. Salisbury is joining Chavez at Sixth Street, while Powell will be working for Lemkau, whose venture has merged with BDT, a merchant bank started by another Goldman alum, Byron Trott. Citadel, whose co-chief investment officer Pablo Salame joined from Goldman, has also recruited heavily from the bank.

“For years people weren’t ready to leave,” said the Wall Street headhunter. “Now senior people take our calls and are even proactively calling us.” – Copyright The Financial Times Limited 2023

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