For a while now, I have commented that the Goldman brand is broken. Don’t forget that a lot of senior people are leaving the firm. Think: Ed Eisler, David Heller, Chris Barter and Raj Sethi. This exodus reflects the fact that investment banking is no longer much fun or extremely well paid.
But one thing is clear to me. This slippery slope has to stop, and stop right now. Unless the Goldman board acts decisively, Goldman risks become one of America’s fallen-angel iconic companies. Whether it’s the Abacus deal, or the alleged insider trading of former board member Rajat Gupta, or the "vampire squid" and "muppet" media attacks, Goldman Sachs is not working.
The board needs to stand up and be counted. This pathetic drift cannot continue. The board is made up of 12 individuals including Blankfein and Cohn. It does not strike me as a particularly strong one. How much time can board memberLakshmi Mittal devote to Goldman Sachs’s affairs when he is chairman and chief executive of Arcelor Mittal? Two board members are business academics. Frankly, given the reputational issues that Goldman is facing, their report card should read: "Needs to improve!"
I believe Lloyd Blankfein has to, and will, step down. He was the face of the firm during the boom, and now in the bust. Can he really go on being the face of the firm? The issue then becomes who replaces him? And despite all the normal investment banking chatter about a "deep bench of talent", the contenders look weak. Gary Cohn, the firm’s president, is too closely aligned with Lloyd and the ancien régime. Mike Sherwood, co-head of the international operation, a brash but bright trader, also represents the old Goldman.
The job will probably have to go to an investment banker to emphasize a fundamental break with the past. The names of Michael Evans, head of growth markets, and John Weinberg, co-head of investment banking, are in the frame. But my moles whisper that no man is an obvious choice. However, as far as I am concerned Blankfein is living on borrowed time. I will always remember "muppetgate" as a case of the mouse who roared and Greg Smith as the guy who won a bronze medal for table tennis, albeit at the Maccabiah Games in Israel, hitting a home run.