David Solomon told a private gathering of Goldman Sachs’ top executives that he had erred by not cutting jobs earlier in 2022, according to people familiar with the remarks.
Speaking to about 400 Goldman partners at a closed-door meeting in Miami this week, the chief executive said he took responsibility for being slow to reduce headcount and pare back investment in new projects when it became apparent there would be a significant business slowdown.
“As the environment was growing more complicated in Q2 of last year, every bone in my body believed we should be much more aggressive in slowing hiring and reducing headcount,” Solomon said, according to one of the people with knowledge of the remarks.
Goldman waited until January to cut 3,200 jobs, roughly 6.5 per cent of its workforce, as part of the bank’s biggest cost-cutting exercise in years. Solomon acknowledged this would have been less drastic if he had taken action earlier.
Goldman’s net profits in 2022 fell almost 50 per cent from record earnings in 2021 on the back of sharply lower investment banking fees, markdowns at its asset management business and losses in its financial technology division.
A bank spokesman said “it would have been unusual not to address the process on headcount reduction this year” at the partner meeting.
The lay-offs followed a period of rapid expansion as Goldman pushed into new businesses while also pausing an annual cull of the poorest-performing employees during the pandemic.
Solomon, who spoke to partners for around an hour, used his prepared remarks to stress the underlying strength of Goldman’s business in trading and investment banking, which have both gained market share in recent years.
“The hope is that, through this meeting, we give the partners transparency and they feel empowered to go out and tell that story to the people they work with. I think we accomplished that,” Ericka Leslie, Goldman’s chief administrative officer and co-chair of the partnership committee, told the Financial Times.
Solomon also told the partners that the number of leaks to the media about Goldman was damaging to the bank. He made the remark in response to a question and it was not part of his prepared statements.
“David made the point that the leaks are damaging to the firm, and they are. I heard the same message from our partners all week,” the Goldman spokesman said.
The comments reflect the difficulties Goldman has faced in the past 12 months as well as the torrent of critical media stories about the bank amid the lay-offs and cuts to employee bonuses.
Goldman dispensed with its formal partnership structure in 1999 when it went public. But the bank still bestows the “partner” title on star performers and it remains one of Wall Street’s most prestigious names.
Goldman has typically held partner meetings at least once every two years, in line with the biennial timeframe for naming new partners.
Last week, Goldman hosted the meeting in Miami over several days to discuss company strategy, hold training courses for newer partners and review presentations for Goldman’s forthcoming investor day, which is scheduled for February 28.
Solomon scheduled the shareholder event after a reorganisation of the bank’s reporting structure in October. The changes included merging its crown jewel investment banking and trading businesses into one division and paring back its nascent digital retail bank.
Part of the pitch to shareholders at the February investor day will be highlighting the market share gains made over the past three years in investment banking and trading, according to the people familiar with the matter.
A move to re-emphasize Goldman’s legacy strengths could resonate well with the bank’s rank and file, some of whom have privately complained about Goldman’s focus on newer businesses like retail banking.
Since taking over as Goldman CEO in 2018, Solomon has set goals of expanding market share in its existing businesses while also diversifying into newer areas such as consumer banking, wealth management and asset management.
Diversification into businesses which promise stable revenues could help Goldman attain a higher stock market multiple, with investors currently placing a lower valuation on the bank’s historical investment banking and trading strengths owing to their volatility.
The Miami meeting was scaled back compared to previous years, according to people with knowledge of the event, in a reflection of the more challenging economic conditions.