Goldman Sachs
Goldman Sachs CEO David Solomon told CNBC that Goldman will no longer take companies with all-white, male boards public. He cited the improved performance of companies with at least one female board member as the reason for the new rule.
"Look, we might miss some business, but in the long run, this I think is the best advice for companies that want to drive premium returns for their shareholders over time," Solomon said.
Solomon was even more straightforward at the World Economic Forum in Davos Switzerland, "I look back at IPOs over the last four years and the performance of IPOs, [when] it's been a woman on the board, in the US is significantly better than the performance of IPOs where there hasn't been a woman on the board."
Starting on July 1, Goldman Sachs will require all boards to include at least one member from "traditionally under-represented groups across various criteria, including gender, race, ethnicity, sexual orientation, or gender identity." They plan to bump up that number to two board members in 2021.
One of the problems that those trying to follow this rule will face is finding those diverse members. Currently, most board members are chosen from people who have already served on a corporate board as corporate CEOs or CFOs or public company directors, and those people are, of course, mostly white males. To try to combat this problem, Goldman is inviting interested companies to use their extensive network of corporate executives to find qualified diverse members.
"This is an example of our saying, 'How can we do something that we think is right and helps moves the market forward?'" Solomon said.
Research has consistently shown the benefits of diverse corporate boards. According to studies conducted by the Harvard Business Review, including women on corporate boards helps temper risk taking, improve board deliberations by representing a new viewpoint, and increase the likelihood that CEOs will be challenged on poor decisions.
A week after Solomon announced the new requirements, Goldman Sachs held their first-ever investors day. Despite the bank's fresh commitment to diversity, men made up the majority of the event speakers, and women were often given smaller roles before smaller crowds.
At the event, Solomon told investors, "Our clients care about the diversity of our organization and our efforts to advance diversity, and this is a personal priority of mine."
The investor's Day may have been a weak showing for the bank, but they have made efforts to improve the diversity of their own workforce.
Goldman Sachs' board meets their requirements: women account for 4 of their 11 board members, and their lead director since 2014, Adebayo Ogunlesi, is black. In March of 2019, Goldman announced hiring goals for the future in the U.S.: half of their new analysts and entry-level associates would be women, 11% would be black professionals, and 14% would be Latino professionals. Solomon has said that one of his main priorities is hiring diverse candidates for high-level positions. To that end, at least two diverse qualified candidates must be interviewed for any new roles.
Some have argued that the announcement of this new requirement was a ploy to distract investors from the recent WeWork disaster that the bank was involved in. The Wall Street Journal went so far as to accuse the bank of "merely following the investment management crowd" because the new requirement doesn't extend to regions where all male boards are most common. Currently, the rule will only apply to the U.S. and Europe.
