According to those familiar with the conversation, David Solomon informed a small group of Goldman Sachs executives that he had made a mistake by not making job cuts earlier in 2022. At a private conference with 400 Goldman partners this week in Miami, the CEO admitted he had been negligent in not acting sooner to cut staff and scale back investment in new initiatives when it became clear there would be a big slowdown in revenue. Solomon stated, according to one of the persons with knowledge of the comments, “Every bone in my body believes we should be much more active in delaying hiring and lowering personnel as the environment was growing more challenging in Q2 of last year.” Goldman delayed cutting 3,200 employees, or around 6.5 percent, until January.
Solomon acknowledged that if he had acted sooner, the consequences might have been less severe. Due to drastically lower investment banking fees, markdowns at its asset management business, and losses in its financial technology segment, Goldman’s net profits in 2022 fell by over 50% from record highs in 2021. It would have been rare for the bank not to discuss the workforce reduction process at the partner meeting, according to a bank spokesperson.
Every fiber of my being believes that we should be far more proactive in halting hiring and cutting personnel in Q2 of last year as the environment became more complex. Theodore Solomon The employment cuts came after Goldman’s aggressive growth into new industries and during the epidemic, it paused its annual purge of the lowest-performing workers. Solomon used his prepared remarks to emphasize the underlying strength of Goldman’s business in trading and investment banking, both of which have increased market share recently. Solomon talked to partners for about an hour.
“We believe that by holding this meeting, the partners will receive transparency and feel empowered to share this narrative with the individuals they deal with. I believe we succeeded in doing that, said Ericka Leslie, co-chair of the partnership committee and chief administrative officer of Goldman. Solomon also mentioned to the partners that the bank was being hurt by the volume of leaks to the media regarding Goldman. He did not include the comment in his prepared remarks; instead, he delivered it in answer to a question. David argued that the disclosures were detrimental to the company, and he is right. All week, our partners have been communicating the same thing to me,” a Goldman official said. The remarks demonstrate the challenges Goldman has had in the bank has been the subject of numerous negative media reports over the last 12 months, in addition to job layoffs and bonuses for employees. When Goldman went public in 1999, it did away with its official partnership structure, but the firm continues to call top performers “partners” and is still one of Wall Street’s most illustrious brands.
In keeping with the biennial schedule for designating new partners, Goldman has traditionally convened partner meetings at least once every two years. To discuss business strategy, hold training sessions for more recent partners, and review presentations for Goldman’s upcoming investor day, which is set for February 28, Goldman held the gathering last week in Miami across a number of days. Following the reorganization of the bank’s reporting structure in, Solomon planned the shareholder event late October. The company’s two most important divisions, trading and investment banking, were combined, and its fledgling digital retail bank was scaled back. According to the sources familiar with the situation, highlighting the market share gains earned over the last three years in investment banking and trading will be a part of the pitch made to shareholders at the investor day in February.