Goldman Sachs Group Inc. will no longer underwrite initial public offerings for companies that do not have at least one diverse board member starting July 1, Chairman and CEO David Solomon said.
In an interview on CNBC, Solomon, now in his second year at the investment banking giant's helm, revealed the new policy for the U.S. and Europe, saying it will have a "focus on women." The policy will be expanded in June 2021 when Goldman will start exclusively underwriting IPOs for companies that have at least two diverse board members.
"We realize that this is a small step," Solomon said Jan. 23. "But it's a step in the direction of saying, you know what, we think this is right."
The move makes Goldman Sachs one of the latest Wall Street institutions wielding its stature and power to promote diversity in the boardroom. As the financial industry has warmed to considering environmental, social and governance risks and opportunities, asset management giants including BlackRock Inc. and State Street Global Advisors Ltd. have urged their portfolio companies to promote women and minorities within their ranks.
According to an analysis of Dealogic and S&P Global Capital IQ data, more than 60 U.S. and European companies went public in the last two years without any female directors. There were over 100 companies that hit the public markets with just one female board member.
Goldman's chief executive cited his own experience in the C-suite as part of the reason behind the new policy, saying the board's diversity has helped him run the company through his first year as CEO. The investment bank's 11-person board currently includes four women and a black lead director. Solomon went on to say that companies with women on their boards tend to have better-performing IPOs than those with exclusively male directors.
The move is also only the latest initiative Goldman has taken up related to corporate diversity during Solomon's tenure.
Nearly a year ago, the bank detailed plans to diversify its workforce in the Americas, intending to have women account for half the analysts and entry-level associates. Goldman was also aiming for black and Hispanic or Latino professionals to account for 11% and 14% of its analysts and entry-level associates, respectively. In November 2019, Goldman disclosed that it had hired its most diverse class of managing directors ever.
When reached for comment, a spokesperson for the investment bank did not provide additional information about the new policy outlined in Solomon's interview.