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As pressure mounts on David Solomon, boss of Goldman Sachs (and part-time DJ), rumors about his potential replacement are swirling. While unverified, a report in June suggested that a co-CEO plan is being discussed at the highest levels, with Jim Esposito, co-head of banking and markets, and Marc Nachmann, chief of asset and wealth management, seen as the top candidates.
Although this idea may not come to fruition, it gained attention last week when a smaller bank and asset manager announced a similar split in the top job. Vontobel, the esteemed Swiss group, appointed Christel Rendu de Lint and Georg Schubiger as co-CEOs. These individuals come from the investment and wealth management divisions respectively, and their appointment aims to smoothly execute a previously agreed long-term strategy. Of course, whether this theory holds true remains to be seen.
Looking at past examples, the track record of co-CEOs is less than impressive. First Republic Bank, one of three US regional banks that failed this year, experimented with the co-CEO structure. However, internal tensions caused the initial implementation to collapse after just six months. Co-CEOs were initially intended to gradually pass the baton from founder James Herbert to the next generation. Mike Roffler was appointed acting co-CEO after Hafize Gaye Erkan resigned, but the continued overlap of executive power may have contributed to the lack of strong leadership during a period of crisis, ultimately leading to the bank’s rescue by JPMorgan Chase.
Deutsche Bank also had co-CEOs, Anshu Jain and Jürgen Fitschen, in 2011 to bridge the gap between their vast Anglo-American investment bank and the domestic German operation. However, infighting and resistance to change resulted in poor performance, leading to the resignation of both CEOs by 2015 and leaving Deutsche Bank in a weakened state for years.
Interestingly, the tech industry has embraced the co-CEO model with enthusiasm. Companies like Netflix, Salesforce, Oracle, SAP, and BlackBerry all experimented with co-CEOs, although most eventually abandoned the concept due to its negative impact on company performance. However, a study published in the Harvard Business Review suggests that, on average, companies with co-CEOs have outperformed those with a single CEO. The study found nearly 100 US-listed companies that ran jointly at some point over a 25-year period, generating a higher average annual shareholder return compared to the baseline.
According to the study, the co-CEO structure works best in the tech sector or when there is a clear division of labor. Co-CEOs can form a partnership based on complementary skills and benefit from gender diversity within management. This is the case at Vontobel, where Rendu de Lint and Schubiger balance each other out with their different backgrounds and working styles.
Goldman Sachs has a history of being run by co-heads when it operated as an unlisted partnership. One former partner, John Whitehead, emphasized the advantages of this approach, stating that two heads make better decisions than one. As the competing interests of different divisions within Goldman Sachs have proven challenging to reconcile under a single leader, a co-CEO structure may be worth considering once David Solomon transitions away from his role.
For the most perplexing and buzz-worthy updates, a well-executed co-CEO structure could bring the necessary balance and effectiveness to Goldman Sachs in the future. Stay tuned.
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