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Goldman CEO’s Board Diversity Ultimatum Sets the Precedent


Goldman Sachs CEO David Solomon made news recently when he announced that Goldman would not take companies public unless those companies contained at least one “diverse” board member. Speaking at the World Economic Forum in Davos, Switzerland, Goldman CEO Solomon said that the initial focus is on women and that it will start on July 1 of this year. By the end of next year, Solomon hopes that Goldman will increase that requirement to two diverse board members. 

This announcement is prominent for a number of reasons. Not only does Goldman have a reputation of being home to some of the sharpest talents on Wall Street, but Goldman led U.S. IPO underwriting last year. Ultimately, this change in Goldman’s policy is the latest in a widespread movement for companies to obtain more diverse representation on their boards and in the C-Suite. The statistics prove why this is such a worthwhile effort.


For example, one study showed that Asian companies with more female board directors obtained better financial results than those that predominantly had men. Solomon himself even argued that over the past four years, the performance of U.S. company public offerings with at least one female director is significantly better than those without. 

Goldman CEO David Solomon mandates board diversity quote

 Ultimately, the implications of Solomon’s decision will likely be significant. While increased board diversity may be a slow-moving trend, there are no signs that it is slowing down. Young growth companies certainly need to think about these issues. However, even old-school, incumbent companies in any sector or industry need to be proactive. Doing so offers a wealth of benefits—including increased revenue for your company and diversity of thought on important problems.



Goldman CEO, David Solomon, is An Important Voice in the Overall Discussion

 One crucial question to ask about Goldman’s decision is the following: why now? 

 To be clear, Goldman hasn’t fired the first shots in this effort to catalyze more board diversity. In fact, by the end of last year, California-based companies were required to have at least one female director on their boards. Startups and other companies based in California responded in kind—even if they held off until the last minute

 With this as a backdrop, the Goldman CEO’s recent announcement comes in an environment where institutional investors, nonprofits, and other advocacy groups have called for more boardroom diversity. The dialogue is changing. Goldman’s decision is another catalyst that gives even more credence for companies to consider their board makeup more carefully. There is some inside baseball at play here, as Goldman did not notify other investment banks about its decision. Doing so may have added to the weight of the decision.

Nevertheless, having one of Wall Street’s most prominent banks make a hard and fast rule about board diversity is a game-changing announcement to the business community as a whole.

 In the past few years, however, there have been plenty of objections to a forced requirement of more female or diverse representation in the boardroom. Often, those objections come down to one word: supply. McKinsey has an excellent discussion of many of these supply-related objections. There is the common excuse of “all of the great female and diverse candidates being taken up.” Others say, “there aren’t enough qualified women in this sector.” And then there is the always-present excuse of “there are no vacancies at the moment.”

 Executives and board members making these excuses, however, are often thinking too narrowly. They have a particular view of what a director should look like and usually prefer prior board experience. However, there are plenty of experienced, non-traditional candidates who bring different yet extremely valuable experience to the company’s board. While some companies feel hesitant to take the chance, first-time directors can thrive.

That said, inertia and perhaps a subconscious bias toward these non-traditional candidates have caused some companies—particularly in the tech and biotech sectors—to move slowly. 

 By drawing a clear line in the sand, however, the Goldman CEO is making it clear that these excuses won’t work. Companies will have to take swift, aggressive action to address this issue. With a voice like Goldman’s at the helm, it will be hard for companies to tune out the noise. 

 Is This a New Era in Board Diversity and Investment Policy? 

While predicting the future can be difficult, it is clear that there is no turning back. The era of the predominately all-white male board is over. The Goldman CEO’s announcement is an essential addition to the overall discussion, as it signals that companies can’t sit on the sidelines with board diversity. In all likelihood, large and small companies alike will get the message and embrace this new era of diverse board representation.

Board diversity, more women in the C-suite, and Blackrocks’s push for companies to make ESG a priority are hot topics with investors. We shall see how other large players will react. However, it is clear a new era is upon us and the precedent is set.



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