Rise of the goldman boy
It looked as if John Thornton's career at Goldman Sachs was going to be sunk by his apparent opposition to the pounds 19bn flotation of the investment bank. But six months on, he's singing the company song and in pole position to run the show. It's almost as if he planned it...
Wednesday 17 March 1999
As co-chief operating officer of Goldman Sachs, Mr Thornton, 45, is within a whisker of the top of one of the giants of the industry. He shares this power with his friend and ally, John Thain. Unusually, Goldman Sachs has flourished in the past under management double acts - most recently that of Stephen Friedman and Robert Rubin, now US Treasury Secretary - and the latest two appear genuinely determined to repeat those successes.
But if push came to shove, there is little doubt who would emerge as top dog, according to both insiders and outside observers. Mr Thornton is heading for the top, his supporters insist, and the top doesn't stop with Goldman Sachs. His friends, contacts and clients are the most powerful businessmen, financiers and entrepreneurs in the world.
Yet it was little more than six months ago that this determined, go-getting American had seemed to be a spent force at Goldman Sachs. Right from an early age, he had been groomed for the top. Internally, he was always seen as one of that select group of rising stars who might one day inherit the company's reins of power, and he rose, seemingly effortlessly, to take his place on the partnership's five-strong management committee.
Then dissension struck. Goldman Sachs last summer announced its intention to float on the stock market in an initial public offering that would value the bank at up to $30bn (pounds 19bn). Mr Thornton always denied that he was opposed to the float, but if there was a focal point for opposition, he was it. Some partners believed a float would damage the distinctive culture which seemed such a vital part of the firm's success. Mr Thornton epitomised those doubts and, deliberately or not, his dissent became public knowledge.
Immediately it put him on the road to irreparable conflict with the firm's then chief executive, Jon Corzine, who spearheaded the IPO plans. The partnership voted yes to the float, and Mr Thornton seemed sidelined. If his opposition had been a bid for Mr Corzine's job, he appeared to have misjudged it.
Six months is a long time in investment banking. Today, Mr Corzine is effectively out - he'll be gone entirely within months - and Mr Thornton, with Mr Thain at his side, is fronting the partnership's revived plans to float on the stock market. Even close colleagues are astonished by the brazen nature of the volte-face.
From late summer onwards, things started to go badly wrong for the float, and by extension for Mr Corzine, a decent, likable man, who despite his great wealth and position, was perhaps eventually just too nice for the cut-throat world of investment banking. The stock market began to slide, Goldman Sachs's trading losses began to mount, reaching a staggering $1bn (pounds 625m) in September alone, and it emerged that the firm was intimately caught up in the near-collapse of one of the world's largest hedge funds, Long Term Capital Management (LTCM).
There was no alternative but to pull the float. Mr Corzine got the blame, both for the debacle of the IPO and for the trading losses. Mr Thornton's moment had come. The knife that shot between Mr Corzine's shoulder blades required little force. Mr Thornton is from the mergers and acquisitions side of the firm, and he was untainted by the losses clocked up by its proprietary trading activities. Having always been opposed to the manner of the float, he made a natural figurehead. Despite the predictability of the coup, it left Mr Corzine profoundly shocked - he didn't see it coming - and when he learnt that a management structure was being imposed that excluded him, there were tears, though he was later to blame his display of emotion on a bad cold.
So who is this new Machiavelli? What makes him tick, and is he really as good as his supporters claim?
Surprisingly, for a successful American investment banker, Mr Thornton has made his career almost entirely outside the United States - firstly as a consummate deal-maker in the UK, which he has made his home, and then for a spell in Asia, where his efforts were rewarded late last year when Goldmans pulled off the world's biggest ever public offering - the $18bn float of Japan's DoCoMo, the cellular phone operator.
Supporters and friends insist he is not the testosterone-charged, Gordon Gecko-type investment banker of legend. There is no dirt on John Thornton. His personal life is squeaky clean. And though he is known for testing the limits of what is acceptable practice in investment banking, he has remained entirely free of financial scandal.
With his quick-witted, staccato style of speech, his only obvious black mark in a 20-year career is the British fashion retailer, Laura Ashley, whose affairs went from bad to worse under his chairmanship.
What is not in doubt about Mr Thornton is his determination, and his almost limitless capacity for hard work. His air miles are legendary. From Rupert Murdoch in Los Angeles one day, Li Ka-shing in Hong Kong the next, to Jac Nasser of Ford in Detroit the day after, his life is a seemingly endless whirl of meetings, smooching, and ideas.
When Mr Thornton got to hear we were planning this profile, it prompted a deluge of calls from allies, friends and acquaintances, all keen to stress his talents and to downplay the negative. In most people, this might be taken as a sign of paranoia, but for Mr Thornton, this is all part of the job. No amount of work and effort is too much if there is a chance of influencing the outcome.
Nobody gets as far as Mr Thornton without making enemies, and Mr Thornton has them in spades. Even friends say they wouldn't want to cross him. Lord Bell, Lady Thatcher's former public relations guru, and now an adviser to Goldman Sachs, has been on both sides of Mr Thornton's battles. He admits: "He is someone you want to have on your side, not someone else's."
Said one banker who has crossed swords with Mr Thornton once too often: "He is a terrible man. Let him have it with both barrels." Said a former colleague: "He has a huge number of enemies... he knocks people about."
Certainly the manner of Mr Corzine's demise has left many in the firm feeling bruised and resentful. One insider recalls; "Most partners would have given their right arm for Mr Corzine, but suddenly, like a palace coup, he was gone, and there are the two Johns in his place." Many believe that Mr Thornton waged a concerted campaign to undermine Mr Corzine's authority, and engineer a situation where he might be seen as a saviour.
Others are more phlegmatic. "Corzine had it coming," says one insider. Still, some partners remain resentful at the steady drip-feed of stories that appeared in the British and US press referring to disquiet within the firm, lack of leadership, and identifying Messrs Thornton and Thain as successors. As the final denouement approached, meetings of the management committee which runs the firm became increasingly stormy. "It was unbelievable," said one former staffer. "Shouting, rowing, doors slamming."
The infighting upset many, including, according to some accounts, Peter Sutherland, the former European Commissioner, now chairman of Goldman Sachs International, and Simon Robertson, the former head of Kleinwort Benson, also now one of the more senior UK partners. All have, in true Goldman's style, now rallied around the official version of events and both have nothing but praise for Mr Thornton. It is a measure of Mr Thornton's ability to move things forward that this praise is apparently genuine. Even his detractors think that there is probably no better man to be leading the firm, at what may turn out to be its most critical period of development since the Thirties.
As one critic who recently left the firm said: "He is a very clever strategist with an elliptical mind. He has a very fresh way of relating to any situation."
Another commented: "He has a very clear grasp of what running a business is all about."
Mr Thornton's background is conventional New England Ivy League. Born in 1954, he was educated at Hotchkiss, a preppy boarding school, and then Harvard, where he studied history. From there, he went to St John's College, Oxford, to study law. At that time, he intended to follow his father and become a lawyer. His education included a spell at the Yale School of Organisation and Management, where he considered going into local government. More by luck than design, he ended up as a graduate trainee at Goldman Sachs. John Thain, by coincidence, joined the firm at the very same time.
Opinions differ as to why he decided to up sticks and come to London, a move which many in the firm regarded as career suicide, but which was, in fact, to prove the making of him. According to one version, Mr Thornton made the switch because he was so unpopular in New York. Said one insider: "He was always regarded as a bit of a maverick." His friends say he was attracted by the "frontier spirit". Whereas, in New York, Goldmans was the Wall Street establishment, in Britain the firm was the outsider. Deregulation under the Thatcher government was opening up the City to foreigners, and Mr Thornton saw an opportunity to build something new. Says Alan Parker, a City public relations consultant: "He is one of the people that took a long, long view over here."
Hungry and ambitious, Mr Thornton quickly made his mark. Despite its fearsome reputation in the United States, Goldman's operation here was little more than an outpost, selling shares in American firms to City institutions. It was also losing money. From the first, he was nothing if not persistent.
"He was constantly turning up at meetings to which he was not invited," says one former colleague. Mr Thornton employed a staffer to work on the all-important merchant banking league tables, making sure that Goldmans got full credit in the Press for those deals it was doing, as well as for some where its involvement was, frankly, peripheral.
He was also not above trashing the opposition. When Michael Julien at Storehouse was looking for help in fending off the corporate greenmailer, Asher Edelman, Mr Thornton turned to Terry Lenzner. Mr Lenzner was always something of a hero to Mr Thornton's generation. He served as a young civil rights lawyer with Bobby Kennedy in the Sixties, where some of his escapades in the Deep South were later to inspire the film Mississippi Burning. He also had a starring role as Richard Nixon's main nemesis in the Watergate hearings. After finally tiring of public life, he set up a firm of corporate investigators, the Investigative Group.
Mr Lenzner's team uncovered enough dirt to persuade some of Mr Edelman's backers to drop out. But not all of Lenzner's people were as careful as they should have been. On another occasion, during the bid battle for Racal, the defence electronics firm, one of the investigators was caught stealing bin bags, with obvious embarrassment to the firm.
Perhaps Mr Thornton's greatest campaign was in thwarting Lord Hanson when Hanson Trust took a tilt at ICI. He undertook a vicious, no-holds- barred demolition job in the Press and in the City on the predator, exposing Hanson Trust to allegations of rampant tax avoidance and excessive executive indulgence. Hanson's City reputation never recovered from the assault.
Colleagues say that right from the day he arrived in London in 1985, Mr Thornton focused on getting his name around, ensuring that he personally took credit for deals. The fact that he not only talked to journalists but seemed to enjoy their company, and counting Alan Parker, one of the City's most successful spin-doctors among his friends, was regarded as a cardinal sin by a firm that in the not-too-recent past had, as a matter of policy, refused to allow journalists even to set foot on its premises. One colleague says: "He tended to monopolise information, to control clients personally."
In a firm that puts loyalty and teamwork above individual ambition, the allegation that he is not a team player is possibly the worst insult that a Goldman's man can level at another. But even that has failed to hold him back. Said one former Goldman's banker: "It has been received wisdom in the firm that the guy was incredibly ambitious, that at some point he would get there."
Along the way, Mr Thornton has picked up some wonderful connections. He is on the board of Ford, the American car giant, and BSkyB, where he is credited with an important behind-the-scenes role in negotiating the takeover bid for Manchester United. A deadly tennis player, his playing partners include Sir John Browne of BP-Amoco, and the noted literary agent, Ed Victor.
This web of relationships has spawned many a deal, such as when he brought Rupert Murdoch and Li Ka-shing together to pluck Star TV in the Far East from under Pearson's nose. Many of these relationships go further than just business ties. Many of his contacts become friends. Says Mr Miller Smith: "Having an Anglophile as head of Goldmans is going to be good for the UK, good for UK business and good for the City."
But he will also radically change the shape of Goldmans, in ways the 220 partners who are the core of firm have yet to realise. Some suspect that he will take the firm into a merger with another bank. Mr Miller Smith again: "He is a grower, not a contractor. He is never frightened to tackle a decision. His advice to you as a client was always be absolutely clear where you want to be, and then get there as fast as you can. Never stop in the middle of the bridge. I am sure he is absolutely clear where Goldman should be."
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