Goldman reminds top dogs it can do what it wants

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NEW YORK, Feb 23 (Reuters Breakingviews) - David Solomon is coming down on former employees with the force of his biblical namesake. The Goldman Sachs (GS.N) leader may confiscate stock the Wall Street bank previously issued to Omer Ismail and David Stark, who jumped ship last year to start a new financial business for Walmart (WMT.N), Bloomberg reported on Wednesday. The move suggests Goldman has more competitors than before. But such steps can send counterproductive signals.

Bankers who join rival institutions usually wave goodbye to deferred stock that has not yet vested. What’s particularly punitive in Ismail and Stark’s case is that, according to Bloomberg, the bank is confiscating shares they had already received. Goldman gives some top executives equity that vests over a three-year period but cannot be sold for five years. Even if Goldman is legally entitled to reclaim the shares, doing so is an aggressive move.

Solomon’s decision reflects the significance of the defection. Ismail was the head of Marcus, the consumer banking unit that is an important growth engine as the $115 billion firm expands beyond its investment banking and trading roots. That has pitted Goldman against a broad range of rivals, from big banks like JPMorgan (JPM.N) and Citigroup (C.N) to fintech firms like PayPal (PYPL.O) in the scrap read more for consumer deposits and credit cards. Walmart, which is backing Ismail’s venture, is a powerful new entrant.

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When top bankers leave to join a client, Goldman has tended to take a magnanimous view. A former employee who departed on good terms is more likely to hire the firm in future. In contrast, Solomon appears less concerned about his bank’s relationship with the $380 billion retailer than punishing Ismail.

Wall Street is in the middle of a talent war, so Goldman may want to discourage bankers who are thinking about leaving. But reminding employees that it can control their wealth even after they leave could backfire. For investors, it’s a reminder that Goldman is fighting on more fronts than before. Managing that will take all of Solomon’s judgement.

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CONTEXT NEWS

- Goldman Sachs is exploring an option to confiscate stock from two former employees after it had vested, Bloomberg reported on Feb. 23, citing people familiar with the bank’s decisions. The employees, Omer Ismail and David Stark, left in 2021 to run a banking startup for Walmart, the giant retailer. Stock awards like those at stake typically vest over three years but the recipients aren’t allowed to sell them until after five years, Bloomberg said.

- Goldman also pulled unvested stock granted to former rainmakers Gregg Lemkau and Eric Lane, who recently left the firm, Bloomberg reported.

- "Equity awards are governed by the agreement signed by the recipient. In each case mentioned by Bloomberg, there were explicit terms which were upheld," a spokesperson for the bank said.

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Editing by Peter Thal Larsen, Karen Kwok and Sharon Lam

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