Goldman Sachs's Partnership Is Shrinking--Update

By Liz Hoffman 

Goldman Sachs Group Inc.'s partnership is shrinking under a new chief executive who wants to restore its exclusivity.

At least a dozen Goldman partners are negotiating their exits from the firm that are likely to be announced in coming weeks, executives said. They would add to a spike in departures already this year among Goldman's partners, whose title has inspired envy across Wall Street for decades but lost some of its luster in recent years.

Elisha Wiesel, Goldman's chief technology executive, and Steven Strongin, who runs the firm's research operation, are among those who are discussing stepping down, according to people familiar with the matter.

A senior partner in stock trading, Jeff Nedelman, quit on Wednesday, other people familiar with the matter said. Martin Chavez, who was co-head of Goldman's trading division and, before that, its chief financial officer, announced his retirement on Tuesday, saying, "the last thing I want to do is be in anyone's way."

In all, up to 15% of Goldman's partners may leave this year, far higher than typical turnover. Fewer are rising to take their place: Goldman last year named 69 new partners, its smallest partner class in two decades.

The partnership is a carry-over from Goldman's past, when top employees risked their own money to finance trades and underwrite securities.

Today's partners own a token slice of the firm, but Goldman continues to select a new class every other year to safeguard its culture and groom future leaders.

Chief Executive David Solomon, who took over last fall, is in some cases deliberately culling a partnership he sees as bloated, according to people familiar with the matter. In boom years before the crisis, Goldman promoted bigger classes. In lean years after, it added seats for legal and compliance executives.

The group peaked last year at nearly 500, up from 221 when the firm went public two decades ago, and as the partnership has grown, some executives believe its allure has faded. Mr. Solomon and his lieutenants aim to keep its ranks aspirational and weighted toward rainmakers.

They must also clear out space for leaders in the new consumer businesses Goldman is building. The founder of a personal-finance app Goldman bought this year joined as a partner, as did the CEO of a wealth-management firm it acquired.

Uncertainty over Goldman's future has prompted other departures. The firm has spent more than $1 billion on a Main Street pivot that has yet to bear fruit. Management changes have shaken up reporting lines and rattled some old-timers. Bonuses have fallen, and Goldman shares are down 22% from their 2016 high.

The risk-taking traders who once ruled Goldman under Lloyd Blankfein have been replaced by investment bankers in Mr. Solomon's inner circle. Traders account for many of the departures; two longtime executives in that unit, Brian Levine and Justin Gmelich, were played off the floor by tasseled marching bands earlier this year.

Some partners have left for big paydays elsewhere. Joe Todd, a longtime investment banker, went to boutique bank Evercore Partners Inc., which gave him a six-year contract, according to people familiar with the matter -- the kind of assurance Goldman won't make.

More departures are expected -- many of them not entirely unwelcome by Mr. Solomon and his team. Last year, the firm set up a program to connect partners to boards and other charitable opportunities, hoping to coax some out the door, people familiar with the matter said.

Mr. Strongin, a former Federal Reserve economist, joined Goldman in 1994 and runs its research department, which writes reports on stocks and economic trends. He has been a partner since 2002.

Mr. Wiesel joined Goldman straight out of college as a coder in its commodities-trading division and in 2017 was put in charge of the firm's engineering force. He is the son of Elie Wiesel, a Holocaust survivor and author who died in 2016.

He is pursuing a philanthropic project that may be affiliated with Goldman, one of the people familiar with the matter said.

Write to Liz Hoffman at [e-mail]

(END) Dow Jones Newswires

September 04, 2019 20:46 ET (00:46 GMT)

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