Is Wall Street Doing Enough to Ostracize Russia? “That’s Not Our Job,” Says Goldman Sachs CEO
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Goldman Sachs chief executive David Solomon delivered an unusually expressive message late last week as Russia’s invasion of Ukraine intensified.
“None of us can fail to see this for what it is: the invasion of a sovereign state, as flagrant a violation of international law as any we’ve seen in recent memory,” he wrote in a missive to the firm’s global staff of about 40,000. “Our hearts go out to the Ukrainian people and all those standing in harm’s way—their bravery and resilience are an inspiration to the world.”
In his memo, Solomon said the 153-year-old banking giant is “winding down its business in Russia” in compliance with U.S. sanctions, and committing $2 million to organizations offering food, clothing, medical care, and other forms of emergency assistance to Ukrainian families.
Solomon, now 60 years old, is facing a new challenge as a wartime leader after being a Goldman Sachs employee for nearly 20 years. Solomon, who spent nearly twenty years working at Goldman and managing various units, including the investment bank operation, was named chief executive in 2018. He has been a force for change since taking the helm. to reduce the firm’s dependence on revenue from stock, bond, currency, and foreign exchange-related businesses and diversify by enhancing its consumer banking, wealth management and asset management divisions.Solomon was recently appointed to oversee the implementation of this new strategy. Forced to defend itFinancial markets have been volatile ever since 2022.
This year, Solomon’s chief challenge will be driving the bank to match the stellar performance of 2021, when it generated record revenue and profit, and saw its highest return on equity since 2007. For his role in last year’s growth, Goldman’s board of directors awarded Solomon with an eye-popping 35 million dollar pay package.
Before the fighting in Ukraine began, he and his executive team were squarely focused on another form of combat: the heated battle for banking supremacy among Wall Street’s elite firms. A big part of that competition hinges on Goldman’s ability to recruit and retain young talent, which explains Solomon’s years-long obsession with modernizing workplace operations and standards. In recent years, he led a campaign to relax dress codes and boost starting pay for the company’s programmers. He also encouraged the firm’s bankers not to work on weekends—They would not be closing a deal if they did..
These reforms were the result of a set. Vanity Fair to label him “The One-Woke Dude” in a 2018 headline. In 2018, he continued to challenge traditional siloed approaches and encourage collaboration. “We really encourage people to be entrepreneurs and find new ways to service our clients or grow our business,” Solomon says. “They can have a big impact on the organization. That is something I feel many find really satisfying. It’s one of the reasons why we’ve been able to hold on to people.”
Solomon spoke to TIME recently about his outsized income, making Wall Street an attractive place to work for millennials and Gen Z, and the role big banks should—and shouldn’t—play in geopolitical conflicts like the war in Ukraine.
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This interview has been edited to be more concise.
Are you satisfied that the financial sector is not playing a sufficient role in Russia’s invasion of Ukraine? Would you agree that Wall Street could be more helpful?
Well, I don’t know that it’s the job of large financial institutions to ostracize Russia. Our financial system has both a government and regulatory overlay. It is called the [U.S.]In this instance, the government decided, and I believe it is appropriate, to sanction Russia. And it’s our job to make sure that we are executing against the legal letter of the law of those sanctions, but also the spirit of those sanctions, which basically require us to wind our business down in Russia.
It’s not like a light switch. You can’t turn it off. You just can’t flick it on one day—one to turn it off. Contracts are made with other people. You’ve got to unwind those contracts. We are now in the process for dismantling our Russia business. Although our Russian business was small in comparison to the rest of the world, the West has placed serious sanctions on Russia. And that requires us to take action, and we’re doing that.
I don’t think businesses are supposed to decide how global trade works in the world. The government sets the policy, and businesses then follow it. This policy is one that I strongly support. What’s going on in Ukraine is absolutely horrible. The actions that were taken seem reasonable and effective to me. But you ask, “are we doing a good job, ostracizing Russia?” That’s not our job. When I say us, I am referring to the whole financial sector.
But it’s not… I know on social media at the moment, there’s a call for companies to ostracize Russia. I don’t understand how we ostracize Russia. We follow the laws—both in the letter and the spirit.
Do the sanctions create any hardships in the general banking sector or just for Goldman?
I wouldn’t use the word hardships, but there’s no question that there are. When you take a participant—Russia—in global markets and the financial system and you disconnect them or turn them off, they are going to be losses. Participation changes can cause losses. There are certain losses within the financial system. In the bank community there are also losses for the investor community.
Do you feel any pressure to make changes in your leadership style as Goldman seeks to recruit more Gen Z workers and millennials? No, young people are demanding different leadership styles.
I don’t feel pressure from that workforce. The workforce demands more transparency, purpose and authenticity. Leaders that can be trusted are essential. When I was 20 years old, the CEO was up in an ivory tower. He was untouchable and inaccessible. You really didn’t know a lot about them. They are so close that you can’t even get to them. Think about what today looks like, with all the information available, including social media and access to communication. Leaders tend to be more visible. And if you’re going to be visible, they don’t want to just see you as a hard-nose decision maker. They desire to know who you truly are. They are looking for authenticity in you. And they’re demanding. They want to understand that they’re working for a company that has a sense of purpose. They want to see that they’re working for someone who’s a human being, that they can relate to. And so I think that’s an evolution.
I don’t feel pressure from that, but I just think the world’s evolved that way. And I think that’s a healthy thing. That doesn’t mean that there’s not hierarchy in organizations. That doesn’t mean you don’t have to work hard and earn your way and prove yourself. These are all important for your professional success.
There’s a lot of talk these days about the future of work and work-life balance, ideas you’ve been grappling with over the course of your career. Have you implemented any pandemic-inspired workplace changes at Goldman that you’ll keep going forward?
Thank you for asking. This is an interesting question. The last year’s focus has been on whether people will return to their workplaces. But I’ve always thought over a long period of time, that to be competitive for a workforce—Goldman Sachs is a highly, highly skilled, highly valued, group of people—that you’ve got to always be thinking about the things you do that make it a super-attractive place for people to want to work. But for us, that doesn’t mean that people can work from wherever they want to on whatever schedule they want to. While there are businesses out there that do this, ours is an apprenticeship-oriented business that works collaboratively with others. Our team brings people together.
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Is it possible to consider yourself a reformer. In many places you’ve worked, you’ve come in, and set goals, but also put your own stamp on the way things are done.
My stamp is always on everything. My opinion is that putting your own stamp on things makes them different from reformers. I wouldn’t use the word reformer, but what I would hope the people who work at the firm say—what I would hope the broad leadership team at the firm says—is that I’m someone that lays out a strategic vision and works with and incentivizes the leadership team to evolve our business, to grow our business. I’m definitely willing to make difficult decisions. Because I think sometimes that’s the job of the leadership. And you’re not always going to be completely popular for every decision you make. But you need to listen, and you need to take in people’s point of view. But ultimately, that’s why being a CEO is very hard—you own the decisions.
Are there recent decisions that are examples of what you’re talking about?
Sure. They are numerous. Since I was appointed CEO, there have been many changes in the business’ structure. There was a huge thing in this organization, when I just decided to take the asset management businesses that were all over the firm and run by different people and put them together in one business, creating an asset management division—and a consumer wealth division. It was a simple idea to combine all of your assets management companies into one business. This division will handle all capital sources and clients. It’s not like such a heretic idea. People thought that it was an heretic idea when it was first suggested. There were some people that left because we were moving forward in a way that they didn’t like. Goldman Sachs is much more powerful. It was difficult to make that decision.
Along those lines, you’ve defended the new strategy recently. Can you explain why you think it’s working?
Our strategy was to grow our market share and invest in our core business. We’ve gained market share on our core businesses. And in addition, we’ve made progress in our four growth platforms: transaction banking, asset management, wealth management, and our digital consumer platform. And we’ve taken costs out. We outperformed last year because of the huge tailwind provided by fiscal and monetary policy. [return on equity] targets. But we see a lot of opportunity in the areas that we’re growing and we’re quite excited about.
Based on Goldman’s record-breaking 2021 performance, you received a $35 million pay package. How do you respond to CEOs whose salaries are escalating?
Well, first of all, I don’t determine my compensation. Based on how competitive the marketplace is for those in similar positions, and such jobs, my compensation will be set by the board. Our overall performance was exceptional. The book value increased by 20%. A 23% increase in our book value was achieved. [return on equity]. Our shareholders were satisfied.
Public company leaders make a lot of money, and there will always be those who are skeptical. You’d be surprised at how many people make more in private and public businesses than you do. There’s a competitive market out there. And that’s what I think the board takes into account when they pay public company CEOs. If we deliver, we do well. We don’t deliver, we do less well. And in addition, I’d also say that if you look at my compensation, 70% of it is actually long-term compensation that—whether you get it or not, and what it’s worth—depends on what happens over the next three years.