For years, there was an allergy inside Goldman Sachs to owning a private corporate jet. Top bankers had access to rides on planes shared with others, but didn’t want to erode their less-than-stellar image on Main Street with the unnecessary extravagance of having their own.
Until David Solomon took over.
The CEO has ordered up a pair of top-of-the-line Gulfstreams for the firm, according to people with knowledge of the matter. The firm chose a G700 model that sells for about $75 million each, is powered by Rolls-Royce engines and offers cabins so long and wide they contain a master suite with shower.
It is moves like this that have earned Solomon his share of detractors within the firm’s top ranks. Some of them worry that his flashy ways can make him appear out of touch at a time when he is also pushing through a program of austere cost cuts. Just last month, he angered critics — both internally and externally — by announcing he took a 20% pay raise in 2019 to $27.5 million. It was the biggest increase given to the CEO of any big U.S. bank, even though Goldman’s stock price has lagged rivals throughout most of his 18-month tenure.
The rapid economic collapse caused by the coronavirus pandemic creates another optics problem for the firm. With unemployment skyrocketing and the death toll mounting, the purchases risk rekindling some of the fury that was directed toward bankers following the 2008 financial crisis, when people took to the streets to protest Wall Street excess.
Expected Perk
A spokeswoman for Goldman Sachs Group Inc. said the purchase of the planes would save it money.
“We have long made private aircraft available to senior executives who travel extensively to see clients, and that travel was arranged through a fractional ownership arrangement with NetJets,” Leslie Shribman said. “A detailed analysis demonstrated conclusively that it would be more cost effective to own the aircraft directly.”
Private jets are an expected perk at the highest levels of Wall Street, where JPMorgan Chase & Co. and Morgan Stanley have had their own for years. And it’s also possible that the use of private jets becomes more accepted in the age of coronavirus because they can mitigate the risk of spreading the disease.
But Goldman’s purchases have already made some at the firm uncomfortable. Even if the jets do eventually save the firm money, internal critics saw the Gulfstreams as attention grabbers, according to people familiar with their thinking.
Congressional Hearing
Solomon’s raise drew immediate condemnation from the likes of Senator Elizabeth Warren and former Treasury Secretary Larry Summers. They criticized the idea of one executive getting so much money at a time of widespread economic pain.
His pay had been set before the pandemic devastated the global economy. Even so, some colleagues have faulted him privately for accepting the raise while asking the rest of the firm to make do with less.
Private jets are inherently fancy, but the kind that Goldman chose are among the most luxuriant. Marketing material for the G700 advertises speakerless surround sound and “the industry’s only ultra-high-definition circadian lighting system.”
It’s the sort of extravagance that can attract unwanted scrutiny, like in early 2009, when the heads of the biggest U.S. banks were called in to testify before congress on the financial crisis.
At one point, the executives were asked to raise their hand if their company owned or leased a private plane. Lloyd Blankfein, Solomon’s predecessor, was the only one who didn’t.
“Let the record show,” said congressman Brad Sherman, “all the hands went up except for the gentleman from Goldman Sachs.”
–With assistance from Stephanie Davidson.
This article was provided by Bloomberg News.
