Goldman Sach's Schwartz Retires, Placing Solomon as Next CEO

Major investment firm Goldman Sachs Group Inc. has announced the sudden departure of its co-president and co-chief operating officer Harvey Shwartz, leaving his main rival David Solomon as the heir apparent of the bank.

Schwartz, who currently shares the roles with Solomon, is expected to leave the company by April 20. Upon his retirement, Solomon will be the sole president and chief operating officer of Goldman. The decision was made in February.

Analysts saw Schwartz’s exit as a good thing for the company since it clarified the succession planning and eliminated the possibility of the firm having co-chief executives.     

Sources with knowledge of the matter said the unexpected announcement came after the firm’s Board named Solomon as the successor to long-serving chief executive Lloyd Blankfein in the previous month.

Speculations over the next head grew further after reports last week stated that Blankfein was preparing to step down as soon as the year ends, and that the company was only choosing between Schwartz and Solomon to succeed him. Goldman did not specify a timeline for his retirement.

Power Shift in Goldman

Analyst Charles Peabody said there is certainly going to be a power shift, which could affect the makeup of the management committee. He added that sometime in 2020 is when the real struggle for resources development might occur between the two sides.

Power at the New York-based bank has long been wielded between bankers and traders, and since Blankfein’s appointment as chief in 2006, that business was dominant.

The industry, however, weakened during the financial crisis, driving Goldman to new businesses, such as consumer banking and low-cost index funds in pursuit of growth.

The company has been trying to transform itself after market trends and regulations weakened its earnings from a once profitable trading business. Blankfein had long tried to maintain the bank’s franchise, constantly expecting that performance would pick up provided that regulators allow him to raise Goldman’s risk-taking.  

Analyst Brenna Hawken stated that performance in the trading division has experienced headwinds over the last two years and they believed a change in leadership may offer a new perspective.

He added that the shift away from trading could receive slight improvements under Solomon, considering his diverse background.

Solomon was known less as a deal maker than a strong manager, capable to rid dead weight, motivate strivers, and gather resources behind significant plans.

For now, Solomon and Blankfein will jointly carry out the plan presented in September, which calls for raising revenue by $5 billion per year, in part by developing operations previously deemed as a sideline, like online consumer lending.

Schwartz outlined the $5-billion-a-year revenue growth target after investors demanded Goldman to be clearer about its strategy outlook, following two quarters of low trading results.       

The apparent thing at the moment is the end of the Blankfein era, while Solomon’s time in power is showing signs of fewer risks and quite possible less reward.

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