Why former Goldman Sachs partners say they left the firm

Goldman Sachs partners are leaving — some 202 during David Solomon’s five years as CEO by Insider’s calculation. 

The venerable Wall Street firm says that the partner departures are part of a decades-old natural order: Partners retire, get bored, seek new opportunities, or are pressed to leave. As the firm names 80 or so new partners every two years, a number close to 200 would need to leave over five years to make way for the new elite class. 

“There’s nothing that’s going on in the context of partner transitions that’s different than any other cycle,” Solomon said earlier this month at an investor conference. The average tenure from executives once they make partner has increased from 6.2 years to 8.3 years, Goldman says. 

But the departures arrive as Solomon faces a barrage of negative press, focused on his use of the corporate jet, his strategy missteps, and his temperament.

An August piece in New York magazine put it bluntly, asking: “Is David Solomon Too Big a Jerk to Run Goldman Sachs?” 

To better understand their reasons for leaving, Insider set out to gather the perspectives of former partners. Interviews with six of them who have left over the past year or so, as well as with one former managing director, shed fresh light on what’s going on inside Goldman, and why so many are exiting.

The executives worked in different parts of the bank, and each had their own motivation for leaving. They’ve since moved to smaller rivals or to clients, or are keeping their next step under wraps. 

There’s no way of fully capturing the reasons behind each and every partner’s departure under Solomon. But put together, the interviews highlighted a few recurring themes, including personnel decisions, pay, and strategy missteps.

“You want to suspend belief and say, I will follow these guys, but with the number of people mistakes and business-strategy mistakes that they have made, I think people have lost confidence in the plan,” said one former partner who was referring to Solomon and Goldman’s president and chief operating office, John Waldron. The person, like the others, was granted anonymity to preserve their relationships at the bank and in the industry. Their identities are known to Insider.

Some of those who spoke with Insider defended Solomon, pointing out that he had made a lot of changes in a short amount of time and that some turmoil was to be expected. They didn’t excuse his strategic mistakes but acknowledged that he felt that his mandate would modernize Goldman Sachs in a way that his predecessors didn’t or, perhaps, couldn’t. 

In particular, before Solomon, Goldman nurtured many fiefs and then spread the wealth from the most successful ones across the firm. Under Solomon, that model has been turned on its head in favor of delivering return-on-equity targets for investors in a way that made Goldman more like JPMorgan.

Goldman’s lead director, Adebayo Ogunlesi, acknowledged that Goldman lost some partners “it did not want to lose in part due to disagreements as GS began acting more like a Fortune 50 firm,” Wells Fargo Securities analyst Mike Mayo wrote in a September 18 report after meeting with Ogunlesi and referencing the company’s stock ticker.  

Adebayo Ogunlesi, Goldman’s lead director. Andrew Toth/Getty Images

Investors have largely supported the shift. Goldman’s stock has gained 94% since the end of 2018, compared with a 79% increase in the S&P 500, Devin Ryan, a JMP analyst, wrote in a September 11 report.

“We think it is also fair to criticize certain aspects of management and its decisions, including Mr. Solomon, as that comes with the territory,” Ryan wrote. “However, when looking back on how the firm has operated since 2019 (Mr. Solomon took the helm in late 2018), we would highlight that a lot has gone right.”

Nonetheless, the changes Solomon has made have angered many current and former employees, partners and managing directors alike, one of the people said.

“It was a multiyear process of pissing a lot of people off,” the person said.

Of the former Goldman executives that Insider interviewed, here are the most cited reasons they gave for leaving Goldman.  

Personnel decisions

One doesn’t get too far into a conversation with a former partner before hearing complaints about the personnel decisions made by Solomon or Waldron. 

According to the former partners, as well as those still at the bank who spoke with Insider, Solomon and Waldron have repeatedly elevated executives without the appropriate management experience into much larger roles, or placed people in charge of teams where they had no industry experience. In many of those cases, the handpicked executives have failed to execute on the firm’s strategic priorities.

Solomon and Waldron have justified the appointments by saying that talented executives should be able to flourish anywhere and that an internal candidate who knows Goldman’s culture is preferable to an outsider. 

Yet the appointments have had destabilizing effects on various teams and contributed to the turmoil, some of the people said. Managers below them in the division have had to spend time on backfilling positions or calming anxieties when they could be focused on developing new business.

“That’s absurd,” Tony Fratto, a Goldman spokesperson, said in an emailed statement, using abbreviations to describe the businesses of asset and wealth management and global banking and markets. “Our AWM business is exceeding its targets and delivering record management fees and our GBM business is taking market and wallet share from peers.” 

John Waldron, president and chief operating officer of Goldman Sachs. Mike Blake/Reuters

Many of the people who spoke with Insider pointed to the asset- and wealth-management division as a prime example of a unit that had suffered from Solomon’s unorthodox leadership choices.

In September 2020, Solomon merged Goldman’s mutual fund and third-party alternatives business with its in-house private-equity business, known as the merchant-banking division, to create one large asset-management division. He named Eric Lane and Julian Salisbury to run the combined business. While Lane had long run one of Goldman’s divisions, Salisbury was a relative newcomer to the senior ranks. He was a talented investor who had only ever managed a team of several hundred people. 

When Lane departed six months later in March 2021, it left Salisbury in charge of a division of about 5,000 people. It wasn’t until the following January that Luke Sarsfield, an investment banker said to be close with Waldron, was named to cohead the division.  Sarsfield also didn’t have management or operations experience that would have prepared him to run a sprawling division. 

When both men struggled, senior partners left, and Goldman stumbled in its efforts to wind down its balance-sheet investments. Salisbury and Sarsfield have both left the bank.

Solomon has now tapped Marc Nachmann to run the asset-management business. Even Nachmann, known internally for his operational chops, is a stranger to the world of asset management, having spent most of his career as a banker, and then the past three years in the markets division. He’s having to do a lot of learning on the job, two of the people said. 

“The asset-management business is one where all of these consultants, all of these clients, want longevity,” one former partner said. “They are frustrated with having the churn.”

Solomon addressed the turnover at the investor conference, saying: “Whenever you put businesses together, there’s going to be disruption and there’s going to be volatility.”

The CEO said he’s satisfied with the division’s leadership and excited about its future.

“We think we’re well positioned, and one of the things that gives us such confidence is the feedback from our clients about our offering, the mandates we’re competing for and winning, gives us a lot of comfort that we have something unique that can be powerful and can grow over time,” he said.

Goldman recently won the right to manage two pensions holding £23 billion, or about $28.5 billion, for the defense company BAE Systems. 

Fratto said the asset-management division was “exceeding its targets under Marc’s leadership,” adding that the firm promoted 11 investors to partner this year and hired another nine managing directors to invest on clients’ behalf. Attrition is the lowest it has been in years, Goldman says. 

Solomon took a similar managerial approach in naming an inexperienced executive when he selected Stephanie Cohen to corun the firm’s consumer-banking division. Cohen also hadn’t run a large division before, and people with direct knowledge of her leadership said they believed the division suffered as a result. After head count and expenses spiked in 2022, Solomon finally pulled the plug and ordered a large-scale retreat. 

Now overseeing a much-scaled-down division called platform solutions, Cohen is on leave.

Solomon “has a big ego, is ambitious, and really wants to disrupt,” one of the former partners said, adding: “He wants to think out of the box and wants people who don’t seem to make sense. He underestimated the pushback he would get from the people on the ground.”

Kathy Ruemmler, Goldman’s chief legal officer. Charles Dharapak/AP

There are other examples. Solomon chose as his chief legal officer, Kathy Ruemmler, President Barack Obama’s White House counsel and a former Justice Department attorney who helped convict the Enron executives Kenneth Lay and Jeffrey Skilling. Hired as the head of regulatory affairs in 2020, Ruemmler became the firm’s top lawyer the following year. 

Unbeknown to Goldman’s partners, Ruemmler held dozens of meetings with the convicted sex offender Jeffrey Epstein in the years before she joined Goldman, The Wall Street Journal reported earlier this year. While Ruemmler disclosed the meetings before she was hired, a Goldman spokesperson told Bloomberg, her hiring in the face of that knowledge has left several people who spoke with Insider questioning Solomon’s judgment — Ruemmler cochairs Goldman’s reputational-risk committee. 

“I regret ever knowing Jeffrey Epstein,” Ruemmler told the Journal.

Lower bonuses, bigger problems 

On Wall Street, one thing that can be counted on to ease personnel problems is pay. There’s no question that Solomon disappointed on that front last year as the boom of mergers and acquisitions and initial public offerings dried up.

But now, the question raging among Goldman’s highest earners is whether the 2022 bonus disappointment is part of a changing norm as Solomon adjusts how to spread the wealth in good times and in bad.

Goldman Sachs partners are paid well by any standard: $950,000 in base salary and often multiples of that in annual bonuses. Bonuses were exceptional in 2021, thanks to a pandemic-fueled increase in trading and investment banking. 

But last year felt very different to the people Insider spoke with. The discomfort started about midyear, when Solomon and Waldron started communicating compensation levels to managers in a way that made many people believe that something might have changed about their approach, four of the people said. 

That was right around the time that losses were beginning to mount in Goldman’s consumer bank, and it didn’t take long for partners to put two and two together. 

Though partners were long accustomed to working from the bottom up to figure out compensation levels, Solomon and Waldron last year imposed top-down figures that suggested they had little understanding of what each desk or business was paying its people, the people said.

When managers looked at their teams and calculated the base salaries they were paying out and the bonuses they expected to pay to keep people, the two sides were far apart, two of the people told Insider. The money Goldman had set aside for compensation and benefits heading into the fourth quarter was over $3 billion less than in the prior year. 

Managers pushed back on those top-line figures, and by the end of the year, Solomon and Waldron relented and topped up the compensation pool.

The adjustment increased the compensation ratio to 32% for the year, compared with 30% the prior two years, and resulted in fourth-quarter results that, one analyst said, were “even more miserable than anticipated.”

But by then, three former partners that Insider spoke with said they had come to believe that Solomon was inclined to reward shareholders at the expense of employees. After all, Solomon had become CEO in late 2018 with a mandate to bring more corporate accountability to a company that had been run as a private partnership before going public in 1999.

It was a clear signal to them, in other words, that the way Goldman had traditionally paid its people — for example, by paying investment bankers to maintain relationships even during years when dealmaking was slow — had fundamentally changed. 

Employees arriving at Goldman Sachs’ headquarters in lower Manhattan. David S. Holloway / Getty Images

Fratto, the spokesperson, disputed that interpretation, saying: “The process for compensation did not change at all. Business heads fight for compensation for their people every single year. The only thing that changed in 2022 was that it was a relative down year off a record high in 2021.” 

Current partners are now looking to the 2023 compensation cycle for signs that Solomon still has their interests in mind. If it’s another year like 2022, some people fear there will be another wave of exits. 

“A decade-high decline in comp in 2022 probably caused a degree of extra concern on the part of some employees,” Mayo wrote in his September 18 report. He added that he worried that Goldman “could feel a need to transfer more wealth from shareholders to employees to placate any potential situation.”

The Fed’s increased scrutiny

What’s not in dispute is that Solomon and Waldron have less flexibility when it comes to paying people because of how large Goldman’s staff has become.

Last year, for example, pay and benefits fell 15%, while its staff rose 10%.

Over the four years through 2022, head count ballooned 33%, to 48,500 from 36,600. Many people who have been hired in technology or consumer-banking roles get a higher percentage of their compensation in base salary. That’s the opposite for investment bankers and traders, who get a larger portion of their compensation in variable bonuses. 

“It was a massive ballooning of head count to support the consumer and tech build-out,” one of the people said, citing Goldman’s expansion in lower-cost locations such as Texas. “Those are people in Plano making $100,000 a year, so there is not a lot of variability.”

Solomon has begun to reverse the head-count trend, firing 3,200 people earlier this year to bring the increase during his tenure to 21%. 

One of the people who spoke with Insider described the shift in compensation structure more simply: “If you have a blowout year, you pay top performers very well. You don’t need to use those discretionary dollars on the people who have more of a fixed compensation scheme. It works in reverse, too, so you can’t pay top performers very well in down years.”

Fratto disputed that characterization, saying: “This makes no sense for Goldman Sachs compensation structure or decision making.”

That increase in head count has brought additional bureaucracy, some of the people said. Solomon, to his credit, according to one person who spoke with Insider, has sought to eliminate red tape wherever he can, for example, by encouraging partners to call or text him directly rather than going through assistants. 

But for investment bankers, traders, and portfolio managers who like to do deals, their reality is that a significantly larger firm is in danger of becoming unwieldy. Partners’ roles are now taken up with more paperwork than some of them would like, three of the people said. 

The pressures of more people are going to increase as Goldman ramps up hiring in the wake of increased scrutiny from the Federal Reserve.

Bloomberg reported last month that Goldman was hiring for several hundred back-office roles to help address the Fed’s concerns, but the people who spoke with Insider said it might take months, if not longer, for Goldman to shake the Fed’s scrutiny. 

While most banks face regular scrutiny from their regulators, some of the people said the focus on Goldman is at least partly driven by Solomon’s headlong push into consumer banking, a highly regulated industry.

“The Fed is all over us,” one person said. “And David doesn’t want to acknowledge it’s all driven by the consumer business.”

Client jokes about GreenSky

In 2022, Solomon publicly acknowledged that Goldman’s consumer ambitions were costing the company too much money. He has been scaling them back ever since. Late last month, for example, Goldman sold off a business it had acquired when it bought United Capital Financial Partners for $750 million in 2019. 

The bank is also now selling its GreenSky point-of-sale financing business. Yet the acquisition, which Goldman made in 2021 for $2.2 billion, still rankles Goldmanites. The deal never made sense to many people inside Goldman, especially those in its investment-banking division who had spent their careers advising corporate executives on takeover targets. 

CEO David Solomon exiting the stage after Goldman Sachs’ investor day in February. Brendan McDermid/Reuters

With GreenSky, Goldman took a financial-technology firm valued at a high multiple that used other banks’ funding and turned it into a business dependent on Goldman’s balance sheet with a lower multiple.

It’s not just internal people who have noticed. One former partner who spoke with Insider said that in calling on clients, people had had to answer for Goldman’s consumer-banking missteps. 

“It’s kind of embarrassing when you are showing up to a client pitching for M&A business, position yourself as the best M&A advisor, pointing to these credentials, and our own deals have been an absolute mess,” the person said. “The number of jokes clients make, and there is some truth, why hire you to do M&A if you can’t even do your own M&A.”  

Fratto noted that Goldman had been ranked No. 1 in M&A advisory for 20 years running, adding that the firm’s consumer troubles were mostly behind it.

“We began narrowing our consumer ambitions nearly a year ago, have been executing on that strategy ever since, and the market has reacted positively,” he said. 

In Solomon’s defense

Goldman has said that much of the bad press surrounding the CEO has come from former partners who disagree with the firm’s direction, with Fratto saying it’s “not surprising” that many of Insider’s sources were “disgruntled former employees.” 

Even so, Solomon apparently believes that if he can win back the former partners, some of the noise will die down, one of the former partners said. 

To that end, Solomon has gone on offense, charging Alison Mass, the chair of investment banking, with leading the office of alumni engagement and winning back the hearts and minds of the partnership. Over the past several months, Mass has hosted numerous dinners and get-togethers for former partners, in places including London, Paris, and Chicago, where Solomon and former CEO and former Treasury Secretary Hank Paulson spoke to a group of ex-partners.

“He is on a campaign to reconnect with the ex-partners,” one person who saw Solomon at one of the alumni events said. “If he can get them to back off and get them to be supportive, that will help.”

Solomon has also wooed partners at his Wooster Street apartment in lower Manhattan.

Last month, Solomon brought a respected former partner, Russell Horwitz, back into the fold by hiring him as the firm’s chief of staff. Several of the former partners who spoke with Insider supported that move.

The stakes are high as Solomon faces the biggest test of his five-year stint. 

The company’s board met earlier this month when firmwide succession planning was high on the discussion list. And the bank is set to report third-quarter earnings next month. Ryan, the JMP analyst, said he expected quarterly revenue of $12.4 billion, which would be the most in six quarters.  

If Solomon can put up better numbers, and weather the media storm around partner exits and his personality, the CEO may outlast his critics.

Mayo agrees, writing after his meeting with Ogunlesi that “our conclusion is that the CEO is not going anywhere anytime soon,” based in part on his belief that the “board is in anything but caretaker mode, as reflected by the engagement of the lead director.”

That means Solomon still has time to cement his legacy. 

“The people that are really unhappy with the way that David has run the firm are being flushed out, they are cutting their ties with the firm, and they are deciding it’s not the place it used to be,” one of the former partners said. “The people who are left behind are those who are in support. It’s a watershed moment.”

Emmalyse Brownstein contributed reporting.