Goldman Sachs is taking a stand on diversity in the board room. CEO David Solomon announced a new policy which will require companies to have at least one “diverse” board member before they will consider taking a company public.
While diversity can mean several things (race, ethnicity, sexuality, gender), the new initiative is primarily focused on getting more women in board rooms. Goldman Sachs says it will extend the new policy to all the private companies where they are a majority investor.
Just as you would expect from a Wall Street CEO, Solomon analyzed the performance of boards with at least one woman. In statement at the World Economic Forum, Solomon said, “I look back at IPOs over the last four years and the performance of IPOs, [when] it’s been a woman on the board, in the US is significantly better than the performance of IPOs where there hasn’t been a woman on the board.”
This policy will go into effect starting July 1st for companies in the United States and Europe. Goldman Sachs has also stated that they are planning to up the requirement from one to at least two “diverse” members per board by 2021. And if any companies do not know where to being with diversifying their board, Goldman Sachs is curating a network of potential candidates for private companies looking to add new people to their board in light of the policy change.
Without a doubt, this is progress in the right direction. It is excellent that Goldman Sachs, a company with significant power and influence across the globe, is making a firm effort to bring diversity to leadership positions. Sometimes there is nothing quite like a company with deep pockets to help speed along global change.
At least one “diverse” board member is a good start, but it does put a certain burden on that board member to meet certain expectations. This environment breeds feelings of tokenism in the work place. Let’s hope that this policy will encourage boards to take a broader look at their overall selection process. After interviewing and screening so many talented candidates they may have never before considered, why stop at one?