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, is An Important Voice in the Overall Discussion
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.
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.
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.
Click on a category below to view all articles