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Goldman says it wont take companies public without at least one diverse director; heres what it should have said

Some of the biggest banks in the United States are among the powerful institutions in the world. But like every incumbent, they still have to hustle to stay relevant. Morgan Stanley has increasingly gotten behind investors who say they want to see more direct listings, for example. Some of those investors wield a lot of influence after all, and if you cant beat them (and you want to stay ahead of the competition), youd better join them.
Now Goldman Sachs has made an announcement of its own thats very much a part of the times: its CEO, David Solomon, today told CNBC that beginning this year, Goldman will no longer take companies public if they dont have at least one diverse member on its board of directors.
Starting on July 1st in the U.S. and Europe, were not going to take a company public unless theres at least one diverse board candidate, with a focus on women, Solomon said specifically on the networks Squawk Box.
Some will, perhaps rightly, see the announcement as little more than marketing. After all, its already widely viewed as unacceptable for a company to go public without at least one female board member and preferably far more diversity than that. WeWork, for example, tried to go public last year with an all-male board, only to realize soon after that if it wanted to pursue an initial public offering, it had better mix it up a bit. (Of course, by the time it amended its S-1 to name Harvard professor Frances Frei as its first female board member, its offering was already starting to implode.)
Adding ones first female board member ahead of an IPO is such a cliche at this point that the more interesting question is how close to the filing a related announcement will be made.
Airbnb, founded in 2008, brought aboard its first female board member in 2018, so lets call it two years ahead of its presumed 2020 IPO. A decade is a long time to go without any diversity on a board, but its also not atypical. Slacks first female board member, Sarah Friar, joined the company in March 2017, roughly two years before the company eight years old at the time staged its direct listing last year. Similarly, Peloton, the fitness company, now eight years old, brought aboard its first female board director, Pamela Thomas-Graham, in the spring of 2018; in September of last year, it went public.
Important to note at all three companies is whats gone on at the employee level. Slack, for years, has made diversity core to its operations. Airbnb has also made gains in terms of employing a more diverse workforce. Peloton, which was roundly heckled for a recent sexist, dystopian advertisement, has a highly diverse management team.
Indeed, were not criticizing Solomon when it comes to diversity, every little bit helps. But if Goldman Sachs really wants to maintain its place in the banking hierarchy, a much bolder stance would be to only take public companies that have diverse workforces, which is far more important and beneficial to all stakeholders than adding a woman and/or person of color to a board of directors as part of the process of preparing an IPO.
Lets be real here. Directors of public companies typically meet just four times a year to review quarterly results. Its important and necessary, sure. But beyond ensuring that strategic objectives are being met and hopefully making useful introductions to the company, these roles are assigned more importance by industry watchers than they should. (They often pay ludicrous amounts, too.)
Even pledging that Goldman is only going to take public companies that give back say 1% of future profits to the NAACP, as one idea would put it in pole position for those founders and investors who truly want to be progressive. Goldman might miss out on a lot of business in the immediate term, we realize, but were guessing its a gamble that would pay off over time.
In the meantime, institutionalizing a process thats already happening and doesnt have nearly enough real-world impact may be better, just barely, than not institutionalizing that process. Though its shocking to note, according to Solomon, about 60 companies in the U.S. and Europe have gone public recently with all white, male boards.
When we reached out to others of the big banks today to see if they might make a public commitment of their own regarding pre-IPO companies we wrote to Morgan Stanley, Bank of America, and JPMorgan each of them, which have said in various ways that they are committed to diversity, declined to comment.
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