Morning Coffee: Why Goldman Sachs needs more new partners with $950k salaries. The “loud” new CEO who declined a driver

This week, some of Wall Street’s most senior bankers will be waiting nervously on the results of an election.  No, not that one – a very small vote, held by the Goldman Sachs management committee, to approve this year’s list of partner promotions.  This is the top rank at GS, with exceptional pay and perks – a base salary of $950k, plus special investment opportunities and a cut of the firm’s profits.  And it’s a famously competitive and rigorous process just to get through to the final vote. 

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But there will be more happy news than in previous years. Bloomberg reports that the partnership class of 2024 will be the largest of David Solomon’s tenure, larger than the 80-strong class of ’22. (Goldman does Partner promotions in even numbered years and Managing Director promotions in odd years).  That’s quite a change in policy for Solomon – back in 2020 and 2018, he was suggesting that the exclusive partner club needed to get more exclusive.

What’s changed?  Many things, of which the most important two might be “the market” and “Goldman Sachs”.  The 2018 promotion round came during a year that was decidedly mediocre for dealflow and absolutely awful for FICC trading revenue, while 2020 was quite early in the pandemic, and before anyone realised that a deal boom was on the way.  Things got a lot better in 2022, but that was the beginning of a tough period for Solomon himself, as the consumer finance strategy began to unravel.  Now, toward the end of 2024, Goldman can be reasonably confident that there will be good times ahead for a larger partner class to share.  Equally importantly, now that retail banking and platforms are less central to the business model, the company’s future is much more dependent on the kind of people who have to be promoted to Partner eventually if you want to keep them.

And this in turn provides another very good reason why David Solomon would want to declare a big partnership class.  Because as well as saying that he wanted the partnership to be an exclusive club, he’s always said that he wants to improve its diversity.  And if the number of promotions is kept low, then this is close to being a zero-sum game.  Effectively, the current generation of white male bankers gets punished for sins of the past.  (Which they might find quite unfair, since they are much less likely to be guilty than the generation that’s making the decisions).  

So, since Goldman has lost enough senior women this year to generate headlines, it needs to promote a healthy number of them.  But it doesn’t want to leave male revenue generators feeling that they’ve been squeezed out.  The logical consequence is a much bigger overall promotion class.  What with one thing and another, there might be a lot of champagne opened this week.

Elsewhere, the sport of rugby has a concept of a “hospital pass” – a ball timed so that the person who catches it is likely to be immediately and heavily tackled.  Richard Oldfield was apparently into rifle shooting as a student rather than any contact sports, but after having starting his tenure as CEO of Schroders by having to give the news that they face £10bn of outflows before the end of the year, he’ll be familiar with the idea.

Oldfield has not only been in the top job for a very short period of time (he only takes the official title at the end of this week), he’s only been in the fund management industry for just over a year.  Before joining Schroders as CFO, he was a partner at PwC, where he was described as “loud and always up for change and innovation” and “a very agile, innovative mind”.

Among his innovations so far have been “not always wearing a tie” and “coming to work on the train rather than having a chauffeur-driven car”.  These are actually quite revolutionary at a famously blue-blooded City firm, where a key part of the CEO’s job has always been to keep onside with two different branches of the Schroder family.  But giving up the car might not be a sign of further austerity to come for Schroders employees; although Oldfield has raised questions about how large the product range is, he’s also said that he doesn’t believe a financial business can “cut its way to greatness”. 

Meanwhile …

If you are just finishing your PhD in philosophy and have suddenly realised that you can’t face being a professor, then you might be able to get a job at unconventional hedge fund DE Shaw.  They also hire doctors, soldiers and English majors, on the basis that a lot of their business lines don’t have exact equivalents elsewhere in finance, so it’s better to hire bright people with a “beginner mindset” than those who might have learned bad habits elsewhere. (Business Insider)

If you want to understand why financial commentators refer to “animal spirits”, check out the men’s room of a trading floor on a bad day for the market.  (FT Alphaville)

Alantra has been one of the growth stories in European investment banking for the last few years, and recently moved its headquarters from Madrid to London.  So the fact that it’s closing down its Birmingham office and co-chair Andy Currie is leaving the firm might be a reversal, or it might be a sign that Alantra’s ambitions are now for something more than the mid-market deals where it made its name. (Financial News)

Mixed messages from HSBC – while confirming that redundancies are on the way, it’s also looking for more office space. (Bloomberg)

Vis Raghavan continues to put his team together – Jeff Stute, who spent 25 years at JP Morgan and became co-head of North American M&A before moving to Perella Weinberg, is going to Citi to be a vice chair focused on healthcare. (Reuters)

Beware the “perk police” – employers are cracking down on minor breaches of policy like spending meal expenses on groceries. (WSJ)

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