Goldman Two-Step: A Governance Fix Could Serve Blankfein

Agenda-Setting Financial Insight.
Feb. 24 2012 10:26 AM

Goldman Two-Step: A Governance Fix Could Serve Blankfein

Lloyd Blankfein, chairman and ceo of Goldman Sachs, speaks to the 2011 CARE Conference and International Women's Day Celebration in Washington DC, March 9, 2011.

Photo by CHRIS KLEPONIS/AFP/Getty Images

Goldman Sachs has resisted calls to separate the chairman and chief executive roles for years. But there may now be a convenient, if self-serving, reason for the board to do so. Surrendering the CEO title, while remaining chairman, would enable Lloyd Blankfein to gracefully move on after six mostly productive years and put the onus on his presumptive successor, Gary Cohn, to carve his own path.

Blankfein should appreciate the merits of splitting the positions. While he presided over Goldman’s fattest years financially, he also has guided it through difficult regulatory, political and reputational shoals, where having a supportive chairman for some cover might have come in handy.

At 57, he isn’t necessarily in any evident hurry to relinquish duties running the $57 billion bank. For starters, there are still questions about Goldman’s business model in a Dodd-Frank world. The proprietary trading and principal investing operations that helped it achieve a record $13.4 billion profit in 2009 will be effectively banned by the Volcker Rule.

And while Goldman’s book value has doubled under Blankfein’s watch, investors aren’t giving him credit for the accomplishment. Trading around $115, Goldman shares have fallen about 25 percent since Blankfein took over for Henry Paulson. He might find leaving now too ignominious an ending. Stepping up as chairman, though, might be more palatable, especially as the stock gets within striking distance of book value - a signal of investor trust in the health of Goldman’s balance sheet.

Ascending to chairman-only is a half-step in pure governance terms. It is expressly frowned upon (and virtually forbidden) in Britain - and for good reason. A former CEO can stay the hand of a successor, particularly on decisions about strategy or personnel. But it has been done to reasonable effect on Wall Street, most notably at Morgan Stanley.

What matters most is who becomes CEO. Given the front-runner appears to be Blankfein’s long-time deputy, Cohn, the danger of the chairman overstepping his boundaries might be less of a concern. The bigger problem would be whether the new boss can bring enough creative thinking of his own to lead Goldman through a different, more trying, era.

Read more at Reuters Breakingviews.

Rob Cox helped establish breakingviews in 2000 in London. From 2004 he spearheaded the firm's expansion in the U.S. and edited its American edition, including the daily breakingviews column in the New York Times. Prior to joining breakingviews, Rob held senior editorial positions at Bloomberg News in London, Milan, and New York.


Frame Game

Hard Knocks

I was hit by a teacher in an East Texas public school. It taught me nothing.

Chief Justice John Roberts Says $1,000 Can’t Buy Influence in Congress. Looks Like He’s Wrong.

After This Merger, One Company Could Control One-Third of the Planet's Beer Sales

Hidden Messages in Corporate Logos

If You’re Outraged by the NFL, Follow This Satirical Blowhard on Twitter

Sports Nut

Giving Up on Goodell

How the NFL lost the trust of its most loyal reporters.

How Can We Investigate Potential Dangers of Fracking Without Being Alarmist?

My Year as an Abortion Doula       

  News & Politics
Sept. 15 2014 8:56 PM The Benghazi Whistleblower Who Might Have Revealed a Massive Scandal on his Poetry Blog
Sept. 15 2014 7:27 PM Could IUDs Be the Next Great Weapon in the Battle Against Poverty?
Sept. 15 2014 4:38 PM What Is Straight Ice Cream?
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Tv Club
Sept. 15 2014 11:38 AM The Slate Doctor Who Podcast: Episode 4  A spoiler-filled discussion of "Listen."
Brow Beat
Sept. 15 2014 8:58 PM Lorde Does an Excellent Cover of Kanye West’s “Flashing Lights”
Future Tense
Sept. 15 2014 4:49 PM Cheetah Robot Is Now Wireless and Gallivanting on MIT’s Campus
  Health & Science
Bad Astronomy
Sept. 15 2014 11:00 AM The Comet and the Cosmic Beehive
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.