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Goldman Sachs’ recent announcement that it will not take a company public unless it has a woman or member of an ethnic minority on the board shows how the diversity message is becoming central to business success.
Last week some news slipped out which was not picked up in many places, but which is fairly significant when it comes to gender pay issues.
The investment bank has announced that, as of the end of June, it will refuse to take a company in the US and Europe public unless it has at least one woman or non-white board member. experts say.
CEO David Solomon is reported as saying: “I look back at IPOs over the last four years and the performance of IPOs where there’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.” Goldman Sachs has further said that it will raise the requirement for a woman or non-white person to two board members in June 2021.
The decision is significant not just because it spreads the diversity message, but because it does so on the basis that diversity is good for business. Goldman Sachs says that more than 60 US and European companies went public in the last two years without any female board members, but says its research shows those with more diverse boards do much better. It says businesses with at least one woman or ethnic minority member saw a 44% jump in their average share price within a year of going public. This compares to 13% at companies with an all white male board.
It shows that diversity is going to move increasingly centre stage for start-ups – it’s not just a socially beneficial thing; it’s not just about fairness; it’s also about the bottom line. Some may say that having one woman or ethnic minority member is not going far enough, and they would be right, but it’s a step in the right direction at least.
For many years there have been a group of many of the same companies driving the diversity message. Sometimes it feels as if they are just speaking to each other; sometimes it feels a little tick box. But peer pressure is happening and employers are leading on each other to push change. For example, I’ve spoken to construction companies which put diversity firmly on the agenda for talks across their supply chain and challenge received ideas.
There has been a lot of focus on the boards of leading companies – and rightly so – but there is a danger that, in focusing on them, we lose sight of those coming up. Start-ups are a vital part of the jigsaw because we’ve seen the problems employers face in dealing with a legacy of a lack of diversity: once a culture that excludes certain people from the top jobs is established it is much more difficult to change it.