At the World Economic Forum in 2020, Goldman Sachs’ chief executive David Solomon announced that the firm would refuse to take any company public in the US and Europe that did not have at least one diverse board member. It is just one example of how the firm has been at the forefront of the industry in devising innovative solutions to improve representation of minorities and women both internally and across its client base.
The move was widely dismissed as a gimmick by rival banks, none of which has followed suit. Yet is has already produced impressive results. In the year to July, Goldman Sachs placed more than two dozen diverse candidates on the boards of its clients, 40% of whom were women of colour.
Shortlisted
- Bank of America
- BBVA
As this suggests, the success of the initiative has been predicated not only on Goldman’s leading IPO franchise but also its ability and willingness to help companies source diverse board members.
Ilana Wolfe, head of corporate board engagement, says one of the misconceptions about board diversity is that it is due to a shortage of talent.
“It was clear to us that it’s not a pipeline problem but a network issue,” she says. “We sit at a unique nexus of supply and demand. We have relationships with thousands of companies and also with hundreds of executives who would make good board candidates, so we can play a role in connecting people and opportunity.”
The fact that the initiative was underpinned by hard data also helped it gain traction. Analysis of companies it took public in the five years to 2020 showed strong outperformance by those with diverse boards, confirming the results of similar external studies.
Goldman Sachs has since expanded the requirement for companies looking to IPO to two diverse board members, including one woman.
The firm has taken a similar approach in its asset management business, where a target of having one diverse director on the boards of all its portfolio companies was met by the end of last year – a substantial increase from less than 50% at the start of the year.
Goldman has been equally ambitious in setting targets for diversity and inclusion (D&I) among its own employees. In 2019 it unveiled a comprehensive set of “aspirational goals” for improving diverse representation at all levels of the firm.
A year later, the list was updated to include objectives for representation at vice present level and increased targets for the hiring of black analysts.
“It was very important to make these aspirations public,” says Megan Hogan, Goldman’s chief diversity officer. “Now we are not only accountable to ourselves but also to our shareholders, to the public and to candidates that are considering a career at Goldman Sachs.”
It was clear to us that it’s not a pipeline problem but a network issue
Ilana Wolfe
Hard targets include women comprising 50% of campus analyst hiring – a goal that was achieved this year – and 40% of vice presidents by 2025, as well as 7% Black representation at vice president level by the same date and 9% Hispanic/Latino.
At the heart of this diversity drive is a more inclusive approach to recruitment. Over the past year Goldman has used digital interview tools to expand its reach beyond its traditional stamping grounds and now covers nearly 1,000 campuses across its global network.
This has been backed in the US by a strategic focus on women-only schools, Hispanic-serving institutions and historically black colleges and universities.
In the UK the emphasis has been on social mobility as well as ethnic diversity. Last year, Goldman for the first time allowed UK applicants to identify if they received free lunches at school or attended schools for disadvantaged communities.
Goldman has also worked with non-profit organizations and universities across Europe, the Middle East and Africa to source recruits from underrepresented groups. “It’s really important for us to reach that first generation talent,” says Hogan.
Consistency
An area where banks often fall down in terms of diversity is ensuring consistency across business units, with women and minorities over-represented in non-producing roles.
Hogan says this is also a priority. “In places where we see inflection points we really lean in to make sure that underrepresented groups know that there’s a career within these roles, particularly those that traditionally have been dominated by men,” she says.
Like most of its rivals, Goldman does not publish details of representation by business unit. However, the existence of its longstanding and successful Women’s Trader Academy, the first of its kind in the industry, speaks to the firm’s bona fides in this respect.
Other notable D&I achievements during the awards period include the launch of One Million Black Women, an ambitious initiative designed to narrow opportunity gaps in critical areas such as healthcare, housing and education for black women.
Backed by $100 million in philanthropic support and $10 billion in direct investment capital, the groundbreaking strategy is based on Goldman’s Black Womenomics research and led, advised and partnered by black women.
Again, this thoughtful, innovative and data-driven approach to one of the biggest challenges facing the banking sector makes Goldman the right winner of this year’s award.
