Goldman taps Solomon, Schwartz in biggest shakeup in 10 years

Goldman Sachs promoted Chief Financial Officer Harvey Schwartz and investment-bank co-head David Solomon to co-presidents and said Martin Chavez will succeed Schwartz as CFO in the Wall Street firm’s biggest management shakeup in a decade.

Schwartz and Solomon succeed Gary Cohn, who’s leaving for a job in the Trump administration. The appointments take effect Jan. 1, when Chavez will become deputy CFO. He’ll replace Schwartz when the CFO steps aside at the end of April, the New York-based company said Wednesday in a statement.

The executives “have distinguished themselves in their respective areas of expertise and I look forward to working with them in formulating and executing our global strategy,” Chief Executive Officer Lloyd Blankfein, 62, said in the statement.

The promotions position Schwartz and Solomon as possible successors to Blankfein, who has been CEO for more than a decade and was treated last year for lymphoma. The office of president has been used to groom the next CEO in recent decades, with both Blankfein and his predecessor, Henry Paulson, serving in that role. Cohn, who spent more than 25 years at Goldman Sachs and a decade as its No. 2, was named Monday as President-elect Donald Trump’s top economic adviser.

“This is a natural evolution at Goldman,” Mike Mayo, a CLSA Ltd. analyst, said in an interview with Bloomberg Television. “Goldman Sachs has one of the deepest benches out there.”

The bank also named Richard J. Gnodde, 56, who helps run investment banking and Europe, and Pablo J. Salame, 50, who helps oversee the securities unit, as vice chairmen, according to the statement. The title is largely seen as an honorific, and the executives will continue in their management roles.

“Every period presents unique leadership challenges and Goldman Sachs has been fortunate to have had the right leaders in the right seats at the right time,” Blankfein said in a memo to employees, adding “it should never be taken for granted that we have benefited, as well, from a senior leadership pool that has, for the most part, emerged from within our firm.”

The bank has yet to make a decision about which executives will be promoted into the roles vacated by Chavez or Solomon, according to a person with knowledge of the matter.

Schwartz, 52, joined Goldman Sachs in 1997 and became CFO in January 2013 after a series of promotions. In one of the most visible roles at the firm, he trimmed expenses as it grappled with a revenue slump brought on by increased regulation and stubbornly low interest rates.

Solomon, 54, succeeded Jon Winkelried as co-head of investment banking in July 2006, part of Blankfein’s initial management reshuffling after taking the top job earlier that year. He joined Goldman Sachs in 1999 to help run the high-yield debt and leveraged-finance division before becoming co-head of equity capital markets in 2002.

Chavez, 52, was named chief information officer in December 2013 after being appointed to the management committee earlier that year. The Albuquerque, New Mexico, native holds a doctorate in medicine from Stanford University and bachelor’s and master’s degrees from Harvard University, where he took a course on literature of the Weimar Republic.

Goldman Sachs has recently seen an exodus of top executives with close ties to Blankfein as the bank clears the way for its next generation of leaders. Michael Sherwood, 51, co-CEO of the European operation, said last month that he’s leaving at the end of the year. Asia-Pacific Chairman Mark Schwartz, 62, who has worked at the firm for 27 years, also is stepping down and will be an adviser. Cohn, 56, will leave at year-end to head the National Economic Council, helping to coordinate and develop Trump’s economic program.

“Gary is obviously very well regarded inside the firm, and outside the firm with investors, so you are never happy to see someone of that stature leave,” said Devin Ryan, an analyst at JMP Securities. Ryan said he’s not worried about the depth of management at the firm.

The latest appointments are expected to trigger a series of personnel moves across the firm, which is known for fostering a competitive environment among senior executives who jockey for greater power.

“They’ve been preparing these folks for these types of changes,” Marty Mosby, an analyst at Vining Sparks, said in an interview. “This is something they can take in stride.”

Others who have added responsibilities in recent years include Stephen Scherr, 52, who became CEO of Goldman Sachs Bank USA in May; Eric Lane, 42, who helps lead the investment-management division, and John Waldron, 47, who helps run the investment bank.

Harvey Schwartz, whose pay package for 2016 was $27.7 million, started at Goldman as a vice president in the currency and commodities-trading unit, which was managed by Blankfein and Cohn. A 6-foot-4 graduate of Rutgers University in New Jersey, he joined the investment-banking division as co-head of the Americas financing group in 2004.

In February 2008, Schwartz became one of four co-heads of global sales and trading. After being named a member of the risk committee two months later, Schwartz was forced to wrestle with decisions about how to protect Goldman Sachs and allocate capital as the worldwide credit crisis led the firm to sell assets and hold more cash and other liquid securities.

Blankfein, Cohn and Schwartz have resisted investors’ calls in recent years to pull back on fixed-income trading as revenue from the unit slumped, instead urging patience even as competitors including Morgan Stanley retrenched.

While the investment banking co-heads share responsibilities, Solomon is the primary leader of the day-to-day business with a focus on efficiency and profit. His name has long been on a list of potential successors to Blankfein or Cohn, and he was part of the group known as the Goldman Sachs “brain trust” during the financial crisis, according to Andrew Ross Sorkin’s 2009 book “Too Big To Fail.”

Solomon was part of a group that engineered a deal to secure $5 billion in capital from Warren Buffett, in exchange for preferred shares with a 10 percent dividend and warrants to buy an additional shares, according to Sorkin’s book. The move came a day after Goldman Sachs was named a bank holding company in September 2008 as investors worried whether it would need additional capital to stay afloat.

Chavez joined Goldman Sachs in 1993, working in the currency and commodities division that also produced Cohn, Blankfein and Schwartz. He left the firm in 2000 and founded Kiodex Inc., which offers risk-management services to energy companies. Chavez rejoined the bank in 2005, was named a partner the next year and has overseen Goldman Sachs’s principal strategic investments group.

A former director of the International Swaps & Derivatives Association, Chavez has said he’s nostalgic for the boisterousness of the trading floors of the past as traders are now quiet because “everyone’s instant messaging.” Still, he said he’s excited about the opportunities technology brings to banking.

Chavez has assumed more responsibility within Goldman Sachs as software development and coding has become a larger part of the firm’s focus as more trading gets conducted electronically and risk management relies on technology. In a June 2015 Bloomberg Television interview, Blankfein went so far as to say “we’re a technology firm” to prove the point.