Sonya's top 5 takeaways on Goldman Sachs' "diverse boards" announcement
I may sound like a broken record, always asking companies to do better, and faster, but that’s my jam, so here we go again.
Last week David Solomon, the CEO of Goldman Sachs, was interviewed during Davos coverage and spoke about diversity, and an initiative the bank will start later this year:
“From a governance perspective, diversity on boards is a very very important issue and we’ve been very very focused on it.” He goes on to describe a 2020 initiative for their US and Europe business, in which Goldman will “not take a company public unless there is at least one diverse board candidate, with a focus on women.” This requirement goes up to two in 2021.
As you might imagine, if we’re talking about the intersection of financial services and diversity, I’ve got thoughts to share:
First off, this is a good step in the right direction. Solomon himself acknowledges that this is a small step but headed the right way. I agree, and applaud Goldman Sachs for formalizing this step in the direction of gender parity. In the same interview, Solomon indicates this initiative comes about from his own experience (Goldman Sachs’ board is racially and gender diverse), as well as research that shows that in the last 4 years, in the US, IPOs with at least one woman on the board have financially outperformed those with all male boards.
I wonder if the announcement is in part because Goldman has to comply with California’s law mandating at least one woman on the board of each California based public company and Goldman Sachs wants one streamlined process for all US IPOs. Like the saying says, “As California goes, so goes the nation.”
In any case, whether this was done to streamline business processes, or increase profits to stakeholders, or because Solomon values diversity like he mentions in the interview (and is reflected in his own racially and gender diverse board), it’s a good step and I’m grateful for it.
And… (you had to know this was coming, right?)
1. A person isn’t “diverse.” This kind of phrasing makes it sound like white men are the norm, and everyone else is “other.” I would guess that Goldman’s official policy announcement will have more thoughtful wording, but the phrasing indicates that the person at the top may not have a nuanced understanding of the concepts around inclusion and diversity. White men make up about 30% of the American population, so white men are neither the norm nor the majority.
2. What this initiative actually means is that the boards of companies Goldman Sachs takes public have to have one person that is not a white male. I wish they would just say that.
Takeaways 3, 4, and 5 apply not just to Goldman Sachs, but also the broader financial services industry.
3. One person is not enough to make a group diverse. I’m glad Goldman is upping their target for 2021 and hope they continue to increase it. If there is only one woman or person of color on a board, their views may often be dismissed or not amplified, especially in cases where their views run counter to the rest of the group. This 2006 study finds that "the benefits of having women on a corporate board are more likely to be realized when three or more women serve on a board. While even one woman can make a positive contribution, and having two women is generally an improvement, corporations with three or more women on their boards tend to benefit the most from women' s contributions.
4. I predict these token “diverse” seats will go mostly to white women and boards will continue to be overwhelmingly white, in a country that is only about 60% white. Most financial services diversity efforts focus on including more women, and Goldman Sachs’ initiative appears to follow suit with Solomon explaining their requirements for a “diverse board candidate with a focus on women.” This narrow view of diversity is common and stems in part from the discomfort white folks have in talking about race. Executive teams, boards, and hiring managers in financial services are overwhelmingly white. If we want our profession to be racially representative of the country we live in, making fast and effective progress is largely reliant on white people. And we can’t fix a problem that we won’t talk about, so let’s start talking! If you’re ready to join these conversations, do a little reading and listening and then let’s get started. Start with one or more of these books.
The Memo – Sonya’s note: The title of this book indicates it’s for women of color, but reading it is a good way for white folks to gain insight into the hurdles faced by women of color.
5. Board gender equity is important, and is one way to measure how a company is doing on gender equity. Arguably more important, is evaluating how companies treat their least powerful employees. One good barometer is whether or not companies force women to privately arbitrate sexual harassment and discrimination complaints. Goldman Sachs does not fare well here, most recently attempting to force more than 1,000 of their employees into arbitration over a class action lawsuit about gender discrimination.
Learn more and do something about forced arbitration.
For now, I’m celebrating a small win and continuing to look for ways we can do better, faster. White men, we need your help in pressing for faster change inside the companies you work at, do business with, or invest in. Other white men are more likely to listen to you than to me.