Amid dissatisfaction among executives over the upgrade, a friend of Goldman Sachs CEO Solomon will join the board of directors.
According to the media, making Tom Montag, the former Bank of America second-in-command, a director may be Solomon's move to seek internal support from Goldman Sachs. In recent years, the transformation of consumer finance, which he has been urging, has failed. The consumer loan business has suffered a huge loss of $3 billion in less than three years, and the dissatisfaction of executives with him has become increasingly public.
As discontent with CEO Solomon grows within Goldman Sachs, a new board member may become his ally.
On Monday, June 26, Eastern Time, more than one media outlet learned that Goldman Sachs plans to appoint Tom Montag, former No. 2 at Bank of America and current CEO of Rubicon Carbon, a carbon reduction solution provider, as a director at the board meeting to be held in India this week.
Montag worked for Goldman Sachs for 22 years and was a partner at the firm. Before leaving Goldman Sachs at the end of 2007, he was co-head of the firm's securities business. In 2008, he joined Merrill Lynch, which was soon acquired by Bank of America. Prior to leaving Bank of America at the end of 2021, he served as COO and president of Bank of America's global banking and markets business.
Some media outlets have commented that although there are regular changes in the membership of Goldman Sachs' board of directors, Montag worked closely with Solomon during his time at Goldman Sachs and is considered an ally of Solomon. His appointment to the board may indicate that Solomon is strengthening support for himself within the company, as discontent with him within Goldman Sachs becomes increasingly public.
Some Goldman Sachs executives believe that since Solomon became CEO in October 2018, Montag's appointment to the board as his five-year term draws to a close may help dispel speculation about Solomon's future.
In recent years, Solomon has been committed to accelerating the expansion of Goldman Sachs' consumer banking business. Before changing this policy at the end of last year, the consumer banking business had caused losses of $3 billion in less than three years.
Earlier this year, Goldman Sachs disclosed that its platform solutions division, which includes its financial technology and consumer finance businesses, had a pre-tax loss of more than $1.2 billion from January to September last year, and that losses were accelerating every quarter.
The above-mentioned business unit had a loss of $783 million in 2020 and $1.05 billion in 2021. Including the losses in the first nine months of last year, the cumulative losses from the beginning of 2020 to the end of September last year exceeded $3.03 billion. In the fourth quarter of last year, it recorded a pre-tax loss of $178 million. Goldman Sachs' net profit in the fourth quarter of last year fell 69% year-on-year, and the serious losses in its consumer loan business were partly to blame.
The media pointed out that the loss of billions of dollars in Goldman Sachs' consumer loan business has affected other departments' ability to receive bonuses. Although Solomon subsequently publicly admitted to the mistake of transforming into consumer finance, some Goldman Sachs executives, including managing partners, privately hope to hold Solomon further accountable.