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Morning Coffee: Goldman Sachs' co-heads nipped in the ego. Hong Kong bankers would struggle to live in Singapore

There can’t be many things more painful for a top banker than to be made co-head of something, and then to find that the CEO has formed a special committee of all the top managers, and the other co-head is on it, but you aren’t.  It would almost be better to have never been co-head at all than to be certified as “second among equals”.

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Goldman Sachs seems to have handed out not one but two of these psychic gut punches. Stephan Feldegoise (co-head of M&A) and Anthony Gutman (co-head of European investment banking) are on David Solomon’s new investment banking operating committee, but Mark Sorrell (M&A) and Gonzalo Garcia (European investment banking) aren’t.  Now, according to “people familiar with the matter”, both neglected men have threatened to leave.

That’s going to take some serious managing, and all the alternatives seem quite unpalatable for the Goldman CEO.  Calling their bluff could be an expensive move; neither Sorrell nor Garcia will be short of alternative offers, and they will be aware that in a business built on reputations, you only get so many chances to make a threat and then back down from it before it starts eating away at your credibility.

But on the other hand, fudging things and finding a way to get them on the committee is just as problematic.  Although the co-head thing makes it particularly sharp, it’s highly unlikely that these are the only two bankers at Goldman who were just outside the perimeter and are unhappy about it.  If an exception is made and the committee size increased, then there will be more demands and more threats, and Solomon could find his own credibility eroded.

Letting them on would also be a terrible start to the new committee.  The purpose of forming the new operating committee was to streamline a previously oversized and partner-heavy decision-making structure, and to allow Solomon to get advice and assign responsibility.  If he wants to show he’s serious about it as a management system, the last thing he would want to do would be to allow it to become another merit badge for ambitious and sharp-elbowed bankers to chase.  Tough decisions have already been made – there’s no representation on the committee for big and important business lines like ECM and real estate.

There is some outside possibility that a compromise can be found, and some seats freed up.  This is February, after all, the month when top bankers often move jobs.  Beth Hammack is leaving Goldman, for example, and she was on the corresponding operating committee for Goldman’s trading businesses.  Perhaps Feldegoise and Gutman could be persuaded to agree to a sort of job-sharing or alternate-seats arrangement.  Or some other prizes could be found to persuade Sorrell and Garcia that the operating committee isn’t the be-all and end-all.

But barring a miracle of that sort, it looks like David Solomon has a really difficult couple of decisions to make.  Thankfully, he’s got a new committee to help him.

Separately, a recurring story in Asian banking for the last five years has been that of people leaving Hong Kong and moving to Singapore, due to a combination of issues from political unrest, pandemic lockdowns and regulatory pressure on bankers’ lifestyles.  However, new survey evidence suggests that this might have been a financially unwise move.

Although the mainland government is famously hostile to bankers looking too rich, Hong Kong compensation is 46% higher than Singapore at the entry level of “investment banking analyst”, and still 13% higher for executive directors.  Relationship managers in wealth management earn the same 13% premium, despite this being one of the hotter labour markets in Singapore.

Of course, the broad averages are not necessarily informative for anyone’s individual income (and in fact, the premium may not even be there in the middle ranks). And across a career, it’s likely that the relative positions will fluctuate.  But for the time being, it seems that either Hong Kong bankers are getting “danger money”, or that Singapore bankers are paying the price for a bit of an easier lifestyle.  Presumably this will reach equilibrium when people from Hong Kong start saying that they’d like to move, but they can’t afford the pay cut.

Meanwhile …

“I don’t know, maybe I’m just too immature — I was not able to have those conversations”. Kyle Davies explains, after a fashion, why he ghosted the lenders of Three Arrows Capital and decided to sit out the whole liquidation process while not giving too many details about his location to the authorities.  His co-founder, Su Zhu, took a slightly different approach and consequently ends up saying prison wasn’t so bad. (New York Magazine)

Citadel (specifically the macro and fixed income teams reporting to Edwin Lin) is still hiring, taking traders and systematic portfolio managers from ExodusPoint, BlueCrest, Brevan Howard and JP Morgan. (Bloomberg)

Differing trends in ESG – JP Morgan and State Street have left Climate Action 100+, meaning that it now has none of the top 5 asset managers to put pressure on companies… (FT)

… But HSBC has now become the first bank to set limits on “facilitated emissions” for its lending and capital markets business, which will presumably translate into limits and targets for the bankers doing the deals. (Bloomberg)

If you’ve ever wondered what it was like to be a trader in the New York branch of a Chinese state bank, then documents coming out in some litigation suggest a) pretty weird and b) don’t expect promotion to the highest levels if you’re not in tune with the values of the communist party. (NY Post)

Any analysts or associates who proposed to their significant other last week – good news! Getting married in your 20s is only associated with higher divorce rates if you cohabited before marriage.  And as everyone knows, living with an investment banking analyst is functionally equivalent to not cohabiting. (WSJ)

Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Click here to fill in our anonymous form, or email Signal also available.

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AUTHORDaniel Davies Global Editor

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