David Solomon, chief executive of Goldman Sachs, delivered an unusually powerful message last week as Russia’s invasion of Ukraine intensified.
He wrote that “no one can fail to see it for what is” in a message to his global staff of around 40,000. Our hearts go out to the Ukrainian people and all those in danger. Their bravery and resilience are an inspiration to the whole world.
Solomon wrote in his memo that the 153-year old banking giant was “winding down its Russian business” to comply with U.S. sanctions. He also committed $2 million to organizations offering food and clothing and other forms of emergency assistance for Ukrainian families.
Solomon, 60, is now faced with a new challenge as wartime CEO after the invasion. After nearly 20 years of service at Goldman Sachs, Solomon was named chief executive, including managing various units, including the investment banking unit. Solomon has worked hard to diversify its revenue streams by increasing its wealth management, consumer banking, and asset management divisions. Solomon was forced to defend the new strategy after it became controversial. Financial markets have become more volatile since 2022.
Solomon’s main challenge this year will be to get the bank back on track after 2021, when it achieved record revenue and profit and had its highest return of equity since 2007. The board of directors at Goldman awarded Solomon a staggering $35 million salary package for his contribution to last year’s growth.
Before the conflict in Ukraine, Solomon and his executive team had their sights set on another type of battle: the fierce struggle for dominance among Wall Street’s elite banks. The ability of Goldman to attract and retain young talent is a major part of this competition. This explains Solomon’s long-standing obsession with modernizing workplace standards and operations. He has led an effort to lower dress codes and increase the starting salary for programmers in recent years. He encouraged bankers at the firm to not work weekends unless they were closing deals.
The proposed reforms led Vanity Fair in 2018 to call him “One Woke dude” in a headline. He has been a tireless worker to dismantle siloed thinking and encourage collaboration. Solomon states, “We encourage people to be entrepreneurs and to find new ways to serve our clients or grow the business.” They can make a huge impact on the company. It’s something that I believe many of them find very fulfilling. This is one of the main reasons we have been able to hold onto people.”
Solomon recently spoke with TIME about his large income and why Wall Street is attractive to millennials, and Gen Z. He also discussed the role that big banks should and shouldn’t play in geopolitical conflicts such as Ukraine.
Are you satisfied that the financial industry played a responsible role in Russia’s invasion of Ukraine? Do you think Wall Street could do more to help Ukraine?
I am not usually the one that handles informing you that large financial institutions are responsible for ostracizing Russia. We work in a financial system with a regulatory and government overlay. In this instance, the [U.S.] government has placed sanctions on Russia. Our responsibility is to ensure that we execute against the lawful letter and spirit of these sanctions.
It is not like a light switch. It can’t be turned off. It can’t be turned off. There are contracts between people. You have to end those contracts. So we are currently working to unwind our Russian business. Although our Russian business was small compared to the rest of the world, the West has placed serious sanctions on Russia. We have to act, and we are doing so.
Businesses are not supposed to determine how global trade is conducted in the world. The government sets the policy, and businesses then follow it. This policy is one that I strongly support. The situation in Ukraine is truly terrible. The actions taken were reasonable and effective, I believe. You might ask, “Are we doing a good thing, ostracizing Russia?” We aren’t usually the ones that handle this. This is the entire financial industry.
It’s not… It’s not… It’s not clear to me how Russia is being ostracized. We adhere to the laws, both in spirit and letter.
Are there any hardships that the sanctions might cause for the banking sector in general or Goldman in particular?
Although I would not use the term hardships, there is no doubt that they exist. When you take a participant–Russia–in global markets and the financial system, and you disconnect them or turn them off, they will be losses. This change in participation can lead to losses. There are certain losses in financial systems and the banking community. However, there are also losses in investor communities.
Do you feel any pressure to make changes in your leadership style as Goldman seeks to attract more Gen Z workers and millennial workers to its offices? No, young people are demanding a new kind of leadership.
That workforce doesn’t pressure me. The workforce demands more transparency, purpose, and authenticity. They are looking for approachable leaders. When I was in my 20s, the CEO was in an ivory tower, inaccessible and untouchable. They were a mystery to most people. It’s hard to get close enough to them. I think of today with the transparency of the globe, social media, access, and communication. Leaders are more visible. They don’t just want to see you as a tough-nosed decision-maker. They want to know who you are as a person. They want to see you as a person. They’re very demanding. They want to know that they are working for a company with a purpose. They want to feel that they are working for someone they can relate to and that their company has a sense of purpose. That’s an evolution, I believe.
Although I don’t feel any pressure to do so, I think the world has evolved in that way. That’s a good thing. This doesn’t mean there isn’t hierarchy within organizations. This doesn’t mean that you shouldn’t work hard, earn your way, and show yourself a success. These are all important for professional success.
These days, there’s much talk about future work and work-life balance. Ideas you have been struggling with throughout your career. Are there any changes to your workplace that were inspired by the pandemic?
Yes, I get the question. It is interesting to note that the future of work has been more closely tied to people returning to work, such as offices. Over a long time, I have always believed that to be competitive for a workforce (Goldman Sachs is a highly-skilled, highly valued group of people), you need to think about what makes it an attractive place to work. However, this doesn’t necessarily mean that everyone can work wherever and whenever they like. While businesses do this, ours is an apprenticeship-oriented business that works collaboratively with other businesses. We bring people together.
Are you a reformer? You’ve been a reformer in many organizations you have worked.
I put my stamp on everything. It’s different from being a reformer to put your stamp on things. Although I wouldn’t say I like the term reformer, what I would hope that the people at the firm would say is that I am someone who lays out a strategic plan and encourages and supports the leadership team to improve our business and grow our company. I am willing to make difficult decisions. Because sometimes, that’s the job of the leader. You’re not always going to be completely popular for every single decision you make. You need to listen and be open to other people’s points of view. It’s not easy to be a CEO. You have the final say.
Are there any recent decisions that show what you are talking about?
Sure. There are many of them. Since I was appointed CEO, there have been many changes in the business’ structure. This was a big problem in the organization. I decided to combine the various asset management businesses from the firm, which different people ran, and create an asset management division and a consumer wealth division. It seemed obvious to combine all of your asset management businesses into one division. This allows you to manage all your capital sources and all clients you manage. It isn’t a crazy idea. It was, however, a radical idea that people rejected when we suggested it. Some people left because we were moving in a direction they didn’t like. The bottom line, Goldman Sachs has become a lot more powerful. It wasn’t easy to make that decision.
You’ve also recently defended this strategy. Can you tell us why you believe it works?
Our strategy was to invest in core businesses and increase market share. Our core businesses have gained market share. We have also made significant progress on our four growth platforms, including transaction banking, asset management, wealth management, and digital consumer platform. We’ve also reduced costs. Last year was a great year for monetary and fiscal policy. We also outperformed our [return-on-equity] targets. We see lots of opportunities in the areas we are growing, which we are very excited about.
You were awarded a $35 million salary package based on Goldman Sachs’ record-breaking 2021 performance. What advice would you give to CEOs concerned about the rising salaries?
First of all, my compensation is not determined by me. My compensation is determined by the market for these positions and jobs. Our overall performance was exceptional. Our book value grew by 20.5%. Our return on equity was 23%. We delivered for shareholders.
There will always be skepticism about how much money people make running public companies. There are many businesses, private and public, where I have earned more than you. There is a strongly competitive market. That’s something I believe the board considers when they pay CEOs of public companies. If we deliver, we do well. We don’t deliver. We do less well. Aside from that, 70% of my compensation is long-term compensation. Whether you get it or not, and how much it’s worth, will depend on the next three years.
