In a recent meeting with Wells Fargo banking analyst Mike Mayo, the lead director of Goldman Sachs, Adebayo Ogunlesi, expressed strong support for CEO David Solomon, dispelling rumors of his imminent departure. Mayo published a note on Monday titled “CEO Stays—No Ifs, ands, or buts,” outlining the Goldman Sachs board’s backing of the leadership of Solomon.
During the meeting, Ogunlesi conveyed the board’s unwavering support for Solomon, emphasizing a significant disconnect between media reports and the board’s assessment of the CEO’s performance and commitment to the company. This show of support comes at a time when Solomon has faced increased scrutiny due to the firm’s lowest quarterly profits in three years and media reports about leadership concerns, job cuts, and partner dissatisfaction.
Mayo noted that Ogunlesi reiterated his positive view of Solomon, asserting that the CEO’s actions align with those of executives at other major corporations and banks. Ogunlesi also highlighted Solomon’s accomplishments in implementing the bank’s strategy, executing changes, and pivoting away from consumer lending, albeit belatedly, while achieving results superior to peers.
Goldman Sachs is currently navigating a complex transition away from its costly foray into consumer lending while awaiting improved dealmaking conditions. Signs of relief have emerged this month with a series of initial public offerings (IPOs), including those from chipmaker ARM and grocery e-commerce company Instacart, where Goldman plays a prominent role as a lead banker.
Mayo quoted Ogunlesi as believing that the company is on track to deliver mid-teen returns over the medium term. The analyst also pointed out that Goldman’s stock has shown resilience in September and remains flat for the year, outperforming Bank of America and Citigroup while lagging behind Morgan Stanley and JPMorgan Chase. In comparison, the KBW Nasdaq US bank index has declined by 19% during the same period.
Since Solomon assumed the role of CEO in October 2018, the stock of Goldman Sachs has experienced a 53% increase, surpassing most of its Wall Street competitors, except for Morgan Stanley and Jefferies, which saw a rally of 95%. The KBW index, however, fell by 21% over the same timeframe.
Solomon, who also serves as chairman of Goldman’s board, recently shared his optimism, suggesting that the string of IPOs could stimulate a resurgence in dealmaking in the coming months. However, he acknowledged that September typically experiences a “seasonal slowdown,” and year-over-year comparisons will be challenging.
Mayo indicated that he requested the meeting with Ogunlesi to address concerns about strategy, execution, management, and the company’s reputation. It marked the first such meeting in seven years. As the lead director, Ogunlesi holds significant influence among Goldman’s independent board members and is the CEO of Global Infrastructure Partners, a private equity firm.
Ogunlesi informed Mayo that partner turnover at Goldman Sachs has been in line with industry norms and that the firm has identified 200 future leaders, maintaining a robust pipeline of talent. Last summer’s internship program received an overwhelming 236,000 applicants, resulting in 2,600 full-time hires in 2023.
Mayo summed up the meeting by stating that while there are ongoing issues to monitor at Goldman Sachs, execution will be critical, concluding that “the CEO is not going anywhere anytime soon, the strategy is on an effective multi-year path, a turn in capital markets activity will make much of the media attention go away, and the board is in anything but caretaker mode.”
Source: Yahoo Finance