Inside Goldman, A Battle Over CEO Succession Brews

Goldman Sachs (NYSE:GS) chief executive Lloyd Blankfein is feeling pretty cocky these days, and having survived four years of post-financial crisis tumult and investigations, he’s telling people he expects to be around in the top job for some time.

All of which has sparked a nasty power struggle among warring camps inside the big Wall Street firm as to who will be Blankfein’s long-term successor, FOX Business has learned.

If Blankfein should leave tomorrow his “emergency” replacement would be Goldman’s president, chief operating officer and Blankfein’s number-two, Gary Cohn, according to people with knowledge of the matter.

But these sources say Goldman's longer-term succession plan is more uncertain; that’s where Cohn is locked in an intense battle with J. Michael Evans, a vice chairman who made his mark inside the firm running Goldman's successful Asian unit, people close to the firm add.

Recent public remarks by Blankfein that he will stay at his job “for awhile” stung both Cohn and Evans, who would like him out sooner so they can have their chance at the top, these people add. Cohn recently told FOX Business he’s content in his current role, and Evans has kept a low profile in recent months as both Blankfein and Cohn have been reaching out to the press. The charm offensive is designed to reverse years of bad publicity concerning Goldman's role in the 2008 financial crisis and charges that the firm had taken advantage of clients during this time.

But Blankfein’s comments touched off even more jockeying between the two men to gain support among the firm's powerful ranks of "partners", or senior executives, to emerge as Blankfein’s eventual replacement, these people say.

One person close to Goldman said Evans was particularly shaken by Blankfein's statements, and as a result he might be considering his options outside the firm if Blankfein signals he will stay at the top indefinitely.

Cohn has in the past weighed whether to leave Goldman and start his own hedge fund, said another person with direct knowledge of the matter.

One problem for both Cohn and Evans is that while they’re both relatively young (52 and 55, respectively), so is Blankfein, who is 58 and could conceivably stay in his job until he’s in his early to mid 60s. Now that he believes that the firm's image and regulatory problems have largely abated, he is under no board pressure to pick a replacement, people close to the firm say.

A spokesman for Goldman declined to comment on the firm's succession plans other than to point to a section in the firm’s latest proxy statement that says Goldman has “developed comprehensive programs and processes for both emergency and long-term executive succession, which are reviewed annually. Consistent with our culture of teamwork and our history developing leaders our goal is to always be in a position to appoint our most senior executives from within our firm.”

What the proxy leaves out is the cloak and dagger nature of the firm’s internal politics when it comes to executive succession. Unlike other big Wall Street firms, Goldman's internal power grabs usually remain a secret at least while they are happening. Back in 1999, Hank Paulson became CEO after quietly leading a coup that ousted former Goldman chief Jon Corzine after Corzine’s bond department suffered a massive loss.

In 2006, Paulson left Goldman to become Treasury Secretary for President George Bush, but after the team of Blankfein and Cohn cautiously prodded the firm's partners for a bigger leadership role since both had run the firm’s trading operations that at the time produced much of the firm’s profits.

The battle between Cohn and Evans is still in its early stages, but it is beginning to resemble those struggles, with both men methodically lining up support among Goldman partners. Evans power base is the firm's investment banking department; he runs the firm's global "growth" markets but when he was running Goldman’s Asia unit he helped the firm snare many lucrative initial public offerings overseas, particularly in China.

Cohn’s power base is the firm's trading division; a long-time commodities trader, Cohn also helped Blankfein run Goldman and survive the 2008 financial crisis, which has earned him points within the firm’s senior ranks.

Still, both men come with their own drawbacks. Many partners inside the firm believe a change is needed at the top away from the trading culture epitomized by Blankfein and Cohn, particularly in a new regulatory environment that demands that big banks take less risk.

Goldman’s cut-throat trading culture has come under fire in recent years, and the firm paid a $550 million fine to the Securities and Exchange Commission to settle civil charges over its sale of toxic assets to its large customers during the run-up to the 2008 banking meltdown.

As a result, many partners at Goldman say a client-focused banker might be best to run a post-Blankfein Goldman Sachs, but they’re not sure Evans is a good fit. On paper, he has it all: The record of making money and running large sections of the company. But people inside Goldman say many partners are put off by his temperament, and what they consider his hyper ambition.

Either way, both men might have to wait — and possibly for a while. As first reported by FOX Business,  Blankfein had told friends in early 2011 that he was so disgusted with the media and regulatory scrutiny of the firm that he was considering stepping down. The move came as the firm's board even weighed whether Goldman needed a new CEO following some uneven public appearances by Blankfein, particularly before Congressional committees investigating the firm's role in the financial crisis.

Now as that scrutiny has abated he’s telling people just the opposite: he loves his job and can’t see doing anything else. People who know Blankfein say even if he decided to leave after the new year it wouldn’t be the result of board pressure.

Meanwhile, Blankfein is showing no signs of leaving, and that has the guys who want the job on edge and fighting it out, albeit quietly.

"Goldman has its fair share of nasty internal feuds but you just never read about it," said one former top executive who spoke on the condition of anonymity. "This one is no different."