Goldman Sachs vows to only take start-ups with ‘diverse’ boards public

24 Jan 2020

Goldman Sachs Tower. Image: Samuel B./

Goldman Sachs CEO David Solomon said the bank won’t take a company public unless there’s at least one diverse board candidate, with a focus on women.

Goldman Sachs’ CEO has announced that the bank will stop taking US and European companies public if they do not have at least one “diverse” candidate on their board.

David Solomon made the announcement during an interview on CNBC, when he said: “Starting on July 1 in the US and Europe, we’re not going to take a company public unless there’s at least one diverse board candidate, with a focus on women. And we’re going to move towards 2021 requesting two.”

As noted by the Financial Times, Goldman Sachs didn’t mention anything about implementing this measure Asian countries, where there is a particularly poor gender balance at board level.

Firms with women on boards perform ‘significantly better’

During the CNBC interview, Solomon noted that the Goldman Sachs board has eleven members, four of which are women. “We have a black lead director, and I really value the diverse perspectives we’re getting, which are helping me run the company,” he added.

Solomon said that it is a “very, very important issue”, and that Goldman Sachs has seen companies with at least one female director performing “significantly better” at their stock market debuts than companies without any female directors.

The investment bank will not be turning away companies with no female directors, but rather plans to offer them advice and introduce them to people who might be suitable for the role.

Solomon said: “We realise that this is a small step, but it’s a step in the direction of saying, ‘Well, we think this is the right advice’, and we’re in a position also because of our network to help our clients if they need help placing women on boards.

“This is an example of saying, ‘How can we do something right that can move the market forward?’

“I’m a big believer that unless you take care of your stakeholders, more broadly, in the medium and long term, you won’t deliver outstanding returns.“

Criticism of the move

Last year’s MSCI World Index report listed 126 companies with no female directors. The majority (108) of these companies were based in Japan and nine were based in China or Hong Kong. Of the remaining nine companies with all-male boards, five were in the US.

Besides the investment bank’s failure to push for diversity on Asian boards, Goldman Sachs has also received criticism for not going far enough with its pledge.

Ken Bertsch, head of the Council of Institutional Investors, told the Financial Times that investors want to make sure companies go beyond “tokenism”. “On one hand, Goldman is a little behind the times. It is a good step to have at least two or three women on the board,” Bertsch said.

The Washington Post also noted that Goldman Sachs has “in the past underwritten high-profile IPOs such as Facebook and WeWork that later came under fire for their lack of female directors”.

Not enough ‘real-world impact’

Meanwhile, TechCrunch suggested that the announcement is “little more than marketing”, because it is already widely viewed as unacceptable for a company to launch an IPO without at least one female board member.

Silicon Valley editor at TechCrunch, Connie Loizos, added: “If Goldman Sachs really wants to maintain its place in the banking hierarchy, a much bolder stance would be to only take public companies that have diverse workforces, which is far more important – and beneficial to all stakeholders – than adding a woman and/or person of colour to a board of directors as part of preparing for an IPO.”

Loizos argued that this is because directors of public companies typically meet four times a year to discuss quarterly results, adding that the bank is “institutionalising a process that’s already happening and doesn’t have nearly enough real-world impact”.

Kelly Earley was a journalist with Silicon Republic