Goldman's Solomon: Dark horse contender in CEO race


Solomon avoids the spotlight. Bald and paunchy, with a gravelly voice and a casual demeanor, he hardly radiates power. Described by friends as a family man close to his wife and two daughters, Solomon lives in an apartment on tony Central Park West in Manhattan, and is not known to flaunt his wealth.

Solomon's candor on a topic of great sensitivity, Wall Street pay, appears to set him apart from some colleagues.

"The incentive systems have gotten out of whack," the alumnus told Hamilton College students last year. Short-term incentives producing outsize pay have not been productive for the financial system, he said, and need to be "rebalanced."

Associates who describe Solomon frequently use words like "modest" and "humble," but they also paint him as tenacious, hard-working and shrewd.

Guggenheim's Schwartz said the two speak often about their personal lives and current events, but avoid talking business because they're too competitive. "We'd kill each other," he joked.

Former Bear Stearns Co-president Warren Spector said in an interview that he was sorry to see Solomon leave the bank for Goldman: "It was their gain and our loss."

Solomon's sometimes bland exterior masks a savvy negotiator who can turn on his charm as readily as he can pound fists on the table, say coworkers and competitors.

"David has always been a very large presence in meetings and rooms, even when he wasn't maybe the most senior guy in the room," said a former colleague. "But you also wouldn't mind hanging out with David after the meeting's over. That's a pretty unique combination."

Solomon entered Wall Street in 1984 armed with a B-plus average and a degree in political science from Hamilton College, a liberal arts school in Clinton, New York, more than 200 miles northwest of lower Manhattan.

After beginning his career as a commercial paper salesman, he moved into junk bonds and leveraged finance at Salomon Brothers, Drexel Burnham Lambert and Bear Stearns. They were hot and scrappy in his day, but today evoke memories of fantastic implosions.

Clients describe Solomon as one of a handful of top Wall Street bankers who can deliver what they need in a crunch -- whether that means funding, connections or advice on the wisdom of a deal.

"Clients feel he's a smart guy who's going to be very responsive to their needs," said Ted Virtue, chief executive of private-equity firm MidOcean Partners, who hired Solomon at Drexel and occasionally consults with him on deals.

Solomon has the pull of Jimmy Lee, a vice chairman of JPMorgan Chase & Co <JPM.N> who made his mark selling buyout loans, Virtue said. "Those are guys people like to know, who can speak for their organization," he said.

Indeed, Solomon was recently spotted having lunch at the Four Seasons Restaurant in midtown Manhattan in a room full of Wall Street heavyweights.

Lee was chatting nearby with billionaire Home Depot <HD.N> founder Ken Langone. At another table sat prominent financiers Steve Rattner and Damon Mezzacappa, both of whom were once top executives at Lazard Ltd <LAZ.N>.

Solomon was dining with Glenn Hutchins, a co-founder of the private-equity firm Silver Lake Partners <SILAK.UL>, who is a longtime friend and occasional client.

Just 10 days before their get-together on May 19, Hutchins announced the biggest deal in his firm's history: Microsoft Corp's <MSFT.O> $8.5 billion acquisition of Internet telephone service provider Skype.

Once the deal closes, Silver Lake will book a $2 billion profit and 209 percent return on its investment in less than two years. Goldman will have reaped an estimated $30 million in fees from advising on the two transactions.


Across Wall Street, traders have long fought for the upper hand against bankers, and at Goldman, traders have been on top for years.

When Blankfein, a former commodities salesman, took the reins five years ago, Goldman's trading desks were booming, fueling 72.8 percent of profit. But regulatory reform is trimming trading results across Wall Street. Profit from the businesses fell 60.6 percent at Goldman in 2010, and continued to fall in this year's first quarter.

Investment banking is small in comparison, but it's growing -- fees were up 7 percent in the first quarter from a year earlier.

"Going forward, trading will be a sparse area to raise vegetables," said Samuel Hayes, the Jacob H. Schiff chair in investment banking emeritus, at the Harvard Business School.

Goldman has frequently had an investment banker in one of its top management seats, Hayes said, and it would be logical to put one in place again. That's partly because bankers do not just structure and execute deals; they also generate trading business through client relationships.

This may put Solomon in a favorable position, according to some insiders. His businesses have generated solid, steady fees for the company, not the erratic swings in profits and losses that traders often produce.

Still, some think that if Goldman is trying to hearken back to the days of aloof, white-shoe investment bankers, Solomon may not be the best choice.

"The only negative I see for David -- whom I like and admire and find very smart and a very good banker -- is that he is just a mongrel," said William Cohan, who knows Solomon from writing books about Bear Stearns and Goldman Sachs. "He's not a thoroughbred from Goldman Sachs."

Then again, Solomon is not the only Goldman executive to have skipped the Ivy League, or to have worked at other firms. The bank prides itself on being a meritocracy.

Blankfein, the son of a post-office worker, started at the commodities firm J. Aron & Co, which Goldman bought. Cohn went to American University in Washington, D.C. Sidney Weinberg, Goldman's most powerful and longest serving CEO, started as a janitor.

Still, Cohan predicts that Blankfein won't step down for another five years and that his successor will be a banker "whose name we don't yet know."

(Reporting by Lauren Tara LaCapra; editing by Knut Engelmann, Dan Wilchins and Robert MacMillan)

(In June 26 story, corrects name of professor in paragraphs 42 and 43 to Samuel Hayes from Jacob H. Schiff)