This week, Goldman Sachs, one of the largest investment banking enterprises in the world, made headlines for a new policy refusing to underwrite the initial public offering (IPO) of private companies in the United States and Europe that lacked at least one “diverse board member, with a special emphasis on the representation of women in leadership roles.”
This week, Goldman Sachs, one of the largest investment banking enterprises in the world, made headlines for a new policy refusing to underwrite the initial public offering (IPO) of private companies in the United States and Europe that lacked at least one “diverse board member, with a special emphasis on the representation of women in leadership roles.” In other words, having at least one non-straight,white, or male figure on the board is a requirement to be brought into the stock market. The firm has been an influential presence in the financial and economic sectors, only recently pledging to spend $750 billion on climate transition projects and curbing its relations with the fossil fuel industry. Nevertheless, this new move made by Goldman Sachs has garnered praise for its intention, but criticism for its actual implementation. Although the new directive leans substantially in the right direction, the actual policy feels incredibly forced coming from a seemingly trend-setting corporation, as it dd does not solve the underlying issues hindering women from taking on managerial roles in businesses, while exempting countries where such behavior is most prevalent.
In issuing this directive, Goldman Sachs seeks to address a substantial problem in the private sector, and being an influential enterprise makes this action especially noteworthy. Despite leaps and bounds made in gender equality, representation of women in the workplace, especially in leadership roles at large companies, has been a persistent problem in the majority of nations worldwide. This trend features most prominently in among venture-backed private business, the very area that the Goldman Sachs policy addresses. Data from recent studies show that 60 percent of heavily venture-backed businesses lack a single woman on the board, and given that only one in five of the board positions in S&P 500 companies are held by women, those companies which have gone public despite lacking diversity seem to remain that way. Equality arguments aside, Goldman Sachs itself issued a statement describing companies that have at least one female director on the board perform “significantly better” than those without diverse representation. With both an economic impetus, as well as a moral obligation to solve a glaring inequality issue, Goldman Sachs certainly has the initiative to enact such a policy. The problem with Goldman Sachs’ approach to the policy stems from its extremely surface-level approach to dealing with the lack of diversity in private companies, including a failure to urge cooperation with other investment giants. In addition, the company fails to confront sources of discrimination in all levels of operation and address the issue of quality in areas with far less diversity than the U.S. and Europe. Major news outlets have already pointed out two glaring faults in the new Goldman Sachs initiative. Asia, Latin America, and the Middle East harbor the majority of companies with by far the most homogenous leadership, but the investment firm has shied away from swaying financial interests in Asia and Latin America to aid in the creation of more diverse boards. Granted, large cultural divides exist between the United States and much of Latin America, the Middle East, and Asia, but for Goldman Sachs to completely gloss over an attempt to carry through with this new vision definitely detracts from the weight of this initiative. The companies restraint reiterates that such policies are still likely to be swayed by their financial success. In the past, it hasn’t been uncommon for banks to back off of social initiative, such as when, in 2015, the company pledged to move away from fossil fuels, but turned full circle and invested in new coal prospects when confronted with the reality of losing business to competitors. Ultimately, the type of change that Goldman is looking for might eventually culminate in a boardroom rehaul, but making company diversity a requirement for an IPO reduces diversity down to a checkbox. Individual members on a board that would otherwise qualify for IPO under the new standard would still face the disadvantage of being the only diverse member on the board, as these corporations only need to begrudgingly promote sufficient diverse members for the sole purpose of meeting a standard.
The new initiative undertaken by Goldman Sachs shows promise, and the support of a global corporation for much-needed change in the market economy is bound to spur movement in the right direction. However, the leadership at Goldman Sachs, and certainly the rest of the private sector, cannot sit on its laurels thinking that a blow has been struck to the issue of gender inequality in the workplace. There remains much work to be done, as the underlying roots of discrimination and double standards must eventually be tackled directly if the vision of an equal workplace is to be achieved.