Who will succeed Gary Cohn at Goldman Sachs?

Gary Cohn, president and chief operating officer at Goldman Sachs, talks on his phone as he arrives at Trump Tower, November 29, 2016

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Gary Cohn talks on his phone as he arrives at Trump Tower last month

The likely departure of No. 2 Gary Cohn, who appears set to join Donald Trump’s administration as senior economic adviser, sets off a new round of C-suite jockeying at Goldman, where the decade-long tenure of chief executive Lloyd Blankfein has created a younger generation of executives eager to advance.

Cohn holds the title of president and chief operating officer at the Wall Street powerhouse. His duties would likely be split among two executives, The Wall Street Journal has reported. Goldman has a history of management double-acts, which reflects either a collaborative fraternity stemming from its days as a private partnership or a cage fight designed to produce the fittest leader, depending on who you ask in the firm.

The likeliest contenders, according to people familiar with the matter, are investment banking co-chief David Solomon and chief financial officer Harvey Schwartz. Either would effectively be vying for the role of Blankfein’s heir apparent.

A Goldman spokesman declined to comment, though the firm has said publicly in the past that it has a deep bench of executives.

Solomon, 54 years old, is the longest-serving head of a major business line at Goldman. He has spent a decade atop the firm’s investment banking arm, which generates half the revenue of Goldman’s trading arm, but is twice as profitable. There, he has protected the bank’s position as the leading merger adviser and pushed it to expand bigger in corporate lending.

A former junk-bond salesman who joined Goldman as a rare lateral partner in 1999 from Bear Stearns, he is respected, if not universally loved, inside the firm, current and former employees said. With a gravelly voice and an imperial management style, he leads by fiat and occasionally fear, and has often clashed with Cohn in the executive office, people familiar with the matter said.

But he also spearheaded the firm’s effort to lighten the workload for Goldman’s junior bankers, which has improved retention and morale.

Solomon is known less as a superstar dealmaker than a powerful client advocate, able to marshal resources from various departments – in Wall Street parlance, “deliver the firm”. Without an industry specialty, his client relationships have gravitated toward self-made moguls such as Aubrey McClendon, the natural-gas wildcatter who died this year, and private equity founders.

Schwartz, 52 years old, has been CFO since 2013, when he replaced David Viniar, Goldman’s long-serving finance chief. Like Blankfein and Cohn, he came up through the firm’s securities arm, though as a salesman rather than a trader.

He lacks the white-shoe pedigree of many Goldman executives. A Rutgers graduate, he began his finance career far from Wall Street’s elite, first at J.B. Hanauer & Co and then First Interregional Equity, a municipal bond-trading shop that later folded.

In 1997, Schwartz joined Goldman’s commodities unit, the same division that gave Blankfein and Cohn their start.

He rose through its ranks, running the firm’s global sales effort before taking the helm of the securities division in 2008, just as the financial crisis was unfolding. His five years in that role saw Goldman’s trading arm shackled by new regulation.

To some inside the bank, Schwartz embodies the Darwinian ethos that drove Goldman’s trading desk in the last decade, but drew criticism in the wake of the crisis for putting the firm’s interests ahead of clients. Even into his tenure as CFO, he referred to clients as “counterparties,” which struck some colleagues as reminiscent of the firm’s precrisis mind-set.

The top roles at Goldman have tended to swing between bankers and traders. Power typically follows whichever business is on the upswing.

• A brief history of Goldman execs in US politics

Blankfein was elevated after a stint atop the trading division in the early part of the last decade when profits soared and at a time when investment banking revenue was tailing off following the dot-com bust. His predecessor, Henry Paulson, was an investment banker and ascended to the throne in 1999 after mounting losses in Goldman’s trading division.

Investment banking has ruled the roost over the past few years, aided by a historic merger-and-acquisition boom and new regulations that crimped trading profits. But there are signs the merger rally is losing steam, and the spectre of deregulation raised by Trump’s election could re-energise Wall Street trading desks.

There are also emerging power centres at Goldman. One-quarter of the bank’s 35,000 employees are coders and engineers who report to top technology officer R. Martin Chavez, a longtime associate of Blankfein.

And Goldman’s investment management division, which oversees money for pension funds and other big investors, now accounts for nearly a fifth of the firm’s revenue. But its executives are seen as longer shots for a major promotion: Tim O’Neill, 63, is a contemporary of Blankfein, making him an unlikely successor, and co-head Eric Lane is still in his early 40s.

The elevation of senior executives to fill Cohn’s role could create room for promotions lower down.

The lack of turnover among Blankfein’s inner circle has sparked grumbling about a talent bottleneck and has fuelled some partner departures, current and former executives said.

Should Goldman need to appoint a new CFO, many inside the firm expect Stephen Scherr, who runs Goldman’s nascent consumer-banking effort, or Pablo Salame, a co-head of the securities division, to get the nod. Both had been viewed as likely candidates when the position was last open.

Should the bank choose to replace Solomon, who is one of three co-heads of the investment banking division, likely candidates include Marc Nachmann, who oversees Goldman’s financing business, and Gregg Lemkau, a merger banker who has worked on deals including Verizon Communications’s purchase of Yahoo and the split of Hewlett-Packard.

Write to Liz Hoffman at liz.hoffman@wsj.com

This article was published by The Wall Street Journal

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