Goldman Sachs CEO David Solomon garnered media coverage from CNBC and the New York Times for his new plan that requires I.P.O. (initial public offering) clients to have at least one “diverse” board member, if they wish to have his firm’s services. “We’re not going to take a company public unless there’s at least one diverse board candidate, with a focus on women,” Mr. Solomon told CNBC at the World Economic Forum in Davos.
I guess that my first response is it’s about time. Diverse boards are good for business. While hardly the first, Wharton told us that in 2017, Forbes drew the same conclusion in January 2018, and Harvard Business Review in March 2019. The Wall Street Journal article last week asked the question “why, when women earn the majority of college degrees and make up roughly half the workforce, do so few occupy the chief executive job?” Their analysis shows that the number of women CEOs of the country’s top 3,000 companies has more than doubled over the past decade, but it’s still under 6%.
SGI members have participated in the Midwest Diversity Initiative (MIDI), a coalition of institutional investors dedicated to increasing racial, ethnic, and gender diversity on corporate boards of companies headquartered in Midwestern states. The Coalition helps companies to:
- Adopt a policy for the search and inclusion of minority and female board candidates
- Require minority and female candidates to interview for every open board seat
- Instruct third party search firms to include such candidates in the initial pool
- Expand the candidate pool to include candidates from non-traditional sources
These efforts have seen some success: 24 Midwest companies engaged by MIDI have adopted the Rooney Rule, and 10 companies have appointed 12 diverse board members (see the press release). Nationally, we have a long way to go. On the Harvard Law School Forum on Corporate Governance website, Deloitte published a report that, as of 2018, just 34% of all Fortune 500 board seats are held by women and minorities.
On a related front, Melinda Gates found that in 2017 women founders received only 2% of venture capital funding. For lack female founders, the results are even more grim, only .0006% of venture capital has gone to them since 2009. In response, Gates invested in venture capital for women.
Women and people of color have a lot to contribute to the management and boards of successful companies. Personally, I’m glad to see that big business is slowly beginning to recognize it.