Goldman Sachs is refusing to take a company public if it doesn’t have at least one woman or otherwise ‘diverse’ board member, the investment banking giant has said.
Speaking in an interview with CNBC at the World Economic Forum last week, Goldman Sachs chief David Solomon noted that, over the past four years or so, IPOs have performed better when the company in question has had at least one woman on the board.
“So 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,” he said.
“Look, we might miss some business, but in the long run, this I think is the best advice for companies that want to drive premium returns for their shareholders over time.”
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Currently, the rule only applies to European and US businesses, but it’s expected to be expanded to include Asia at some point.
By 2021, the requirement will be for two ‘diverse’ board members.
Many heralded the move as a win for diversity, but others highlighted the distinct lack of diversity on Goldman Sach’s own board; of 11 people, four are women and two are people of colour.
— Kim Furlong (@kim_furlong) January 24, 2020
— Tåmm (@GDZTN) January 24, 2020
But, it’s not clear exactly what constitutes diversity here.
In a TechCrunch article, journalist Megan Rose Dickey says the initiative is “not a novel idea, nor is it the best version of an outdated idea”.
By focusing on women and calling it ‘diversity’, Goldman Sachs misses the mark on what the word actually means, failing to take into account the value of people of colour or trans and non-binary people.
Rose Dickey also noted that women of colour are often also left out of women-focused initiatives.
“This outdated and misguided strategy, where diversity equals more (white) women, needs to be squashed,” she said.
How progressive the folks at #GoldmanSachs are. Do they support women’s right to vote too?
— Melissa Fourie (@melissafourie) January 25, 2020
That said, this is a start. Goldman Sachs may not be going far enough, but even at the women-equals-diversity level, there’s still a way to go in startupland.
According to Crunchbase’s end-of-year 2019 diversity report, only 20% of US startups that secured funding for the first time last year had a woman founder.
That figure has doubled from 9.5% in 2009, but the steep growth happened in the five years between then and 2014. In 2014, 18% of newly-funded startups were woman-led, meaning we’ve seen growth of a mere two percentage points in the past five years.
When an industry stalwart highlights the importance of women at the IPO level, maybe it will force a trickle-down effect that will bring more attention, and more investment dollars, to women-led startups earlier in the game.