NEW YORK -- Goldman Sachs Group LP's Jon Corzine stepped down yesterday as co-chief executive, ceding control of the biggest investment banking partnership after withdrawing a plan to sell stock to the public and losing hundreds of millions of dollars in bond trading.
Corzine, 52, led the drive to go public and lost some of his stature after the 129-year-old firm canceled the stock sale in September as world markets plunged, Goldman employees said. He was also tarnished as a business he helped build -- bond trading -- suffered losses that led to an 81 percent decline in fourth-quarter pretax profit.
Henry Paulson, an investment banker who was Corzine's deputy and then his co-chairman, will be the sole CEO.
John Thain, chief financial officer, and John Thornton, head of Asian operations, were named co-chief operating officers responsible for daily management.
"They're moving him back for trying to do the IPO and then having to pull it," said Alan Bromberg, a securities law professor at Southern Methodist University. The shake-up amounts to a "palace revolt," he said. "It sounds like there is a fair amount of disaffection there."
Corzine, who joined Goldman's management committee in 1985 and became CEO in 1994, will remain co-chairman and focus on shepherding the stock sale.
He won't sit on either the new 15-member management committee, headed by Paulson, or a partnership committee co-chaired by Thain and Thornton.
"I believe this is in the best long-term interest of the firm," Corzine said in a statement. "As we transition management at the top, I will now concentrate my energies on successfully completing our initial public offering."
Goldman may go public by the end of the year, analysts speculate.
The executive changes announced yesterday structure the company "more like a corporation," said John Keefe, an independent securities analyst at Keefe Worldwide.
The company canceled its IPO Sept. 28, days after 14 banks and brokerages, including Goldman, bailed out Long-Term Capital Management LP.
The Greenwich, Conn., hedge fund lost more than $4 billion trading bonds.
Under Corzine, Goldman made many of the same bets as Long-Term Capital, said executives in the firm, leading to the fourth-quarter earnings decline.
Corzine's ascent to the top of Goldman was heralded as a sign of how important global bond trading had become to the biggest investment banks.
The native of Illinois had been co-head of the firm's bond division since 1988 and, by the first half of 1998, Goldman derived 43 percent of its $5.46 billion in revenue from trading.
That ratio, up from 35 percent in 1995, is one of the highest on Wall Street. At Morgan Stanley, by contrast, the figure was 24 percent.
Goldman's other major business, investment banking, accounted for 29 percent.
Pub Date: 1/12/99