Goldman Sachs received a flurry of media attention after announcing at Davos that it will carry out IPOs only for companies that have at least one woman or non-white board member. As CEO David Solomon put it, “Starting on July 1st in the U.S. 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.”
Among corporations that are already publicly held, women’s representation on boards is low, though not non-existent. Every company in the S&P 500 has a woman on its board of directors, and women hold about one-in-five seats on Russell 3000 company boards.
Among privately held companies, the picture is starker. An analysis of “some of the most heavily funded private companies” found that 60% do not have any women on the board, and only 7% of seats are held by women.
It’s unclear how many of those private companies may look to go public. But a recent high-profile IPO effort shows that when a company with an all-male board tries to go public, an uproar can ensue. When WeWork filed its registration for an IPO last year, the company noted its “culture of inclusivity” — but also listed its board members, all of whom were men. Controversy erupted, and the company added a woman. (This problem was soon overshadowed by numerous other problems plaguing WeWork.)
Goldman’s new rule may stem from the best of intentions. But as founder of a company that works to bring gender equality to one of the most male-dominated industries — the energy sector — I see it as misguided, and potentially damaging.
Metrics throughout the pipeline
Businesses cannot simply insert a woman into a board of directors and claim to stand for gender equality and diversity. Doing so is a fig leaf. If a company is genuinely committed to gender equality and diversity, that commitment will show up in its metrics at all levels.
I’ve seen this in action among oil and gas companies. Amid increasing pressure in recent years, many have been appointing more women to their boards. The share of women board directors in oil and gas has doubled over the past 10 years, reaching 14%. But the number of women employed in the industry has just barely budged, and is currently at about 22% worldwide (one estimate put it at 19% in 2010).
To get a sense of how committed any company is to diversity and gender equality, groups like Goldman Sachs should look at the entire talent pipeline. What is a company doing to recruit talent? What are the gender and racial breakdowns of staff in entry-level jobs, and those getting promotions each year?
Ask about the workplace culture
It’s also essential to look at culture, which is often the biggest driver of diversity and inclusion. Culture underpins diveristy and inclusion. In taking a company public, corporations like Goldman would do well to look at what employees say about the company culture. In anonymous surveys, do they report experiences with sexism, racism, and other forms of intolerance? What’s being done about these things?
We have found that asking broader questions can sometimes be the most insightful in determining whether employees feel that they opportunities based on merit. When we surveyed employees in the energy sector, we asked whether they feel a sense of belonging at their company; whether advancement is based on fair and transparent criteria; and whether the company has a “culture of genius” in which leaders assume talent is innate rather than something developed through learning.
These results have helped companies discover that their playing fields are not as level as they assumed.
Perhaps the biggest problem with Goldman Sachs’ announcement is how limited it is in scope.
As PricewaterhouseCoopers points out, “Research has found that for a group to have a real impact on decision-making, it needs to form 30% of the total body.” For women’s voices to be heard, the goals must be elevated.
There’s also no good reason to exempt businesses based in other parts of the world. In Asia, South America, and Africa there are plenty of excellent, talented women who can lead. U.S. businesses looking to push gender equality and diversity around the world should include all regions from the get-go. (Goldman has said it will consider implementing the plan worldwide in the future.)
The message companies need to hear is that gender equality and diversity throughout the ranks is a business imperative. The evidence abounds. When Goldman made its announcement, I had just returned from an international conference in Saudi Arabia, where I delivered that argument.
It’s good to see the issue getting increased attention. But the clearest sign that the Goldman plan doesn’t address the big issues may have come from the company itself just a week after its announcement at Davos. Goldman Sachs held its first-ever “investor day,” and had a long series of men present. The first female speaker reportedly took the stage more than five hours into the event.
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