Goldman Sachs’ Commitment to Board Diversity
At Davos, our CEO David Solomon announced a new standard for taking companies public: at least one diverse board member.
At Goldman Sachs, we are committed to driving diversity in our work with our clients and in our core commercial activities. We recognize that diversity is a shared priority among many of our clients and stakeholders and we are further encouraged by the feedback we have received since David’s announcement.
As a trusted advisor, conversations with our clients have often centered around governance and board best practices. This announcement standardizes advice we regularly give to our clients – increased diversity of experience, gender identity, race, ethnicity, and sexual orientation on boards reduces the risk of groupthink and unlocks creative and impactful solutions for their companies. As a continuation of these conversations, our ecosystem should call attention to how we are defining ‘board-ready’ candidates. Limiting the definition of ‘board-ready’ candidates to CEOs, CFOs, and other executives with former public board experience excludes a large part of the pool who are qualified, but took a different path to get there.
Over the past 18 months since we announced Launch With GS, conversations have frequently come back to board diversity. It is apparent that there is a strong pipeline of diverse, board-ready candidates and a network of corporates looking to develop the best board for their company. As a firm, we are committed to providing access and introductions to this extensive network of strong potential candidates. Given the essential role networks play in board candidate selection, we will continue to leverage Goldman’s convening power to make a real impact for our clients.
Thank you for continuing to join us in this work and please see below for more about the firm’s commitment from our CEO:
Diverse Leadership Is Needed More Than Ever – Here’s What We’re Doing
by David Solomon
“At Goldman Sachs, we’ve made a commitment to driving inclusive growth through our work with our clients. This plan we announced this past December, ambitious as it is, is just a part of what we strive to do.
Today in Davos at the World Economic Forum, I announced another component of our firm’s holistic approach to driving sustainable, inclusive economic growth. Effective July 1, Goldman Sachs will only underwrite IPOs in the US and Europe of private companies that have at least one diverse board member. And starting in 2021, we will raise this target to two diverse candidates for each of our IPO clients.
This decision is rooted first and foremost in our conviction that companies with diverse leadership perform better. Consider this: since 2016, US companies that have gone public with at least one female board director outperformed companies that do not, one year post-IPO. But in addition to the real commercial benefits, it’s clear that changing the stereotypes associated with corporate decision-making will have many positive effects for society as a whole.
I myself have benefited enormously from the honest counsel of the Goldman Sachs Board of Directors, where our Lead Director is a black man from Nigeria, and four of our 11 seats are held by women. I know that together, we are able to come to wiser decisions for the long-term success of Goldman Sachs than any of us would be capable of alone.
In the last two years, more than 60 companies went public in the US and Europe without a diverse board member. Part of this has to do with the simple fact that the pool of candidates has traditionally been focused on those with CEO or CFO or other board experience. As the corporate world has been painfully slow in moving on promoting talented people of diverse backgrounds, this has impeded the opportunity set for many individuals with decades of experience and important skills that could help companies make better decisions, driving enhanced returns for their shareholders.
We at Goldman Sachs want to change that. Our goal as always is to provide our clients with the best possible advice to help them achieve their goals. An IPO is a complicated process unique to each company, but in some respects it’s rather simple: Diverse leadership leads to better performance. Getting that right – before the IPO – is the right thing for all companies going public.”
This article originally appeared on LinkedIn.
For more on the announcement, watch Jemma Wolfe, head of Launch With GS on Cheddar.