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As pressure continues to mount on Goldman Sachs boss (and part-time DJ) David Solomon, the Wall Street rumor mill has been churning out new theories about his potential successor.
According to one Report In June, a co-chief executive plan that has not been confirmed elsewhere was being discussed at “the highest levels”, with Jim Esposito, co-head of banking and markets, and Mark Nach, head of asset and wealth management. Marc Nachmann is the favorite to win the double award.
The idea may be on the wane, but it struck a chord in Europe last week when a smaller bank and asset manager announced a split of top jobs. The historic Swiss group Vontobel has appointed Christel Rendu de Lint and Georg Schubiger as co-chief executive officers. The two people, who come from the Group’s two core businesses of investment and wealth management, will form a balanced team to smoothly implement the previously agreed long-term strategies. At least that’s the theory.
The precedent is not outstanding. First Republic was one of three regional U.S. banks that failed earlier this year and experimented with a joint-CEO structure. The first incarnation of this imploded a year ago when Hafize Gaye Erkan, now Turkey’s central bank governor, resigned after just six months on the job.
In this case, the co-CEO idea was a succession planning strategy that gradually passed the baton from bank founder James Herbert to the next generation. Elkann’s successor, Mike Roffler, was named acting co-CEO and then sole CEO of the bank, while Herbert became executive chairman. However, continued overlapping of executive powers may have contributed to a lack of assured leadership at a time when the First Republic was caught off guard by frantic withdrawals from panicked depositors, ultimately triggering a bailout from JPMorgan Chase.
When Anshu Jain and Jürgen Fitschen were appointed co-CEOs of Deutsche Bank in 2011, it was for different logical reasons: a desire to harmonize the group’s two engines— — a major Anglo-American investment bank that Jain helped found, and an Anglo-Indian Jain who knew little about the domestic workings of Germany. Infighting and resistance to changes brought about by the 2008 financial crisis contributed to poor performance. By 2015, both men had resigned, leaving Deutsche Bank in limbo for years.
Beyond finance, the technology industry is most keen to embrace the co-CEO model. For a while, this was the pinnacle of tech fashion. Netflix, Salesforce, Oracle, SAP and BlackBerry (then known as Research In Motion) all tried. With the exception of Netflix, they all abandoned the experiment—although in BlackBerry’s case, only after the co-CEOs nearly killed the company. Failed to respond The rapidly growing smartphone market.
Yet despite so much evidence of bad news, companies run by co-CEOs significantly outperformed other companies on average, According to a study Published by Harvard Business Review. The authors found that nearly 100 U.S. public companies (out of 2,200 total) operated jointly at some point during the 25-year period ending in 2020. By comparison, their average annual shareholder return is 9.5%. The baseline is 6.9%.
Research shows that this structure works best in technology industries or where there is a clear division of labor. Co-CEOs “can form left-brain/right-brain partnerships.” Gender balance may also lead to complementary skills, and some companies have adopted co-CEO arrangements to promote management diversity. As was the case with von Tobel, Lendu de Lint and Schubig also canceled each other out in professional background and style.
When Goldman Sachs operated as a private partnership, it was often successfully led by co-heads (a practice that remains the division norm).Twenty years ago, an alumnus gave a speech at Harvard Business School very clear About the virtues of this tradition. John Whitehead, who co-ran Goldman Sachs until 1984, said: “Two people make better decisions than one person leading alone.” In the decades that followed, the group’s various divisions Competing interests, especially in investment banking and trade, are difficult to coordinate through one leader. Whenever David Solomon puts down his banker suit and goes full-time as a DJ, the co-CEO structure might indeed be worth another look if done right.
patrick.jenkins@ft.com
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