David Solomon, Goldman Sachs CEO
Goldman Sachs has announced that they’ll only take companies public if there’s at least one “diverse” member of the board, and preferably a woman.
The Wall Street giant is the latest to eschew a lack of diversity in corporate governance, with Chief Executive David Solomon pointing to the business case for the decision.
“I look back at IPOs over the last four years and the performance [when] it’s been a woman on the board, in the U.S. is significantly better than the performance of IPOs where there hasn’t been a woman on the board,” he says. “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.”
The new rule is set to go into effect in the U.S. and Europe on July 1.
Research tends to support Solomon’s claim that having women on the board is good for a company’s bottom line, but critics have accused Goldman Sachs of missing the mark with an overemphasis on gender parity.
“Women are not a homogenous group,” says Rosanna Duncan, Chief Diversity Officer at Palladium. “Gender parity does not equal diversity or inclusion when women are only being recruited and promoted from the same privileged backgrounds as their existing male counterparts."
According to Duncan, increasing representation of women in the boardroom is a great start, but companies have to consider other minority groups if they want to reap the benefits of true diversity of thought.
“The risk is not only a lack of diversity, but an organisation whose priorities and decisions are all made through the same lens,” she says.
Underscoring these risks, Goldman Sachs is offering to help companies find diverse board members from within their own networks. Fifty percent of Goldman’s board of directors meets their definition of “diverse”, with four women and two men of colour.
There are no women of colour.
“The challenges are complex,” explains Duncan. “There’s not one silver bullet. Gender parity on boards is not a panacea or a quick fix, but rather just one piece of the inclusion jigsaw.”