What Goldman Sachs's New Policy on Gender-Diverse Boards Means for the Future of Women in Business

Wall Street giant Goldman Sachs has a brand-new policy—one they hope will get more women on corporate boards.

Last week, Goldman Sachs CEO David Solomon announced that starting on July 1, they won’t take any company public unless it has at least one diverse board member, with a focus on gender diversity. And they’re not stopping there. In 2021 and beyond, they will increase that number to at least two diverse board members.

While speaking at the World Economic Forum in Davos, Switzerland, Solomon said, “I look back at IPOs over the last four years and the performance of IPOs, [when] it’s been a woman on the board, in the US, is significantly better than the performance of IPOs where there hasn’t been a woman on the board.”

This may seem like a small step. But in the world of finance, this commitment to gender diversity—from one of the biggest banks on Wall Street—is a giant leap.

A 2017 Catalyst study found that women account for just 18% of senior leadership in the top 20 global financial services firms. That’s up from only 13% in 2014 but considering that women make up nearly half of the financial services industry, these numbers don’t make the cut.

Gender inequity in the financial services sector is unfortunately as old as the industry itself—and being a member of the “old boys’ club” remains a true advantage. A recent CNBC/LinkedIn survey found that women in the financial industry were four times more likely than men to believe that women were excluded from networking and social opportunities like after-work drinks or golf outings. And, nearly two-thirds of the women polled say women are less likely than males to reach leadership roles.

They’re right.

Catalyst found that the financial services industry in North America had a 24% gap between the rates of first promotion of women and men. That meant less women were promoted from entry-level to manager, despite asking for promotions at comparable rates. And at 34%, the first-promotion gap is even greater between women of color and their peers.

Here’s what else we know: Gender equity is good for business. McKinsey has found that 56% of companies with a higher share of women at the executive committee level have better operating results, and Credit Suisse & Bloomberg found that companies in which revenue-generating positions were 50% female generated 60% better share price growth over the past eight years.

The data is clear—more diverse companies do better. And the anecdotal evidence is there, as well: We’ve seen women leaders bring companies back from the brink—reversing poor financial performance, scaling challenges from the last recession, and breathing new life in the organizations plagued by scandal. Leaders like Mary Barra, CEO of General Motors, and Ginni Rometty, CEO of IBM, are just a couple of examples.

But, even with this evidence, organizations still aren’t focused on gender equity as a business priority.

Last year, IBM polled 2,300 executives and business professionals across all industries about how their organizations are mitigating the gaps in gender leadership. A staggering 79% of those polled said that they hadn’t prioritized achieving gender equality among leaders. You heard that right: Nearly 8 out of every 10 business leaders, across industries, are not focused on supporting the advancement of women leaders!

This begs the question: If diversity is good for business, why aren’t more organizations rising to the challenge of achieving gender parity at all levels of their organization?

There is a true lack of awareness about the magnitude of the problem and the implications for businesses and the global economy. We all need to talk about the reality of gender representation at every level of our organizations and share the wins that inevitably come when we promote diversity.

The case for gender diversity must be amplified and considered with true intentionality and purpose. Organizations like Goldman Sachs are using their influence and power to incentivize changing the face of leadership on corporate boards (or rather, to punish those who don’t meet our expectations for gender and racial representation in 2020).

That’s a solid first step, but true systematic change will come when organizations realize the financial and societal benefits of achieving gender parity and act to purposefully hire and promote to fulfill both a financial obligation to their shareholders and a moral obligation to their workforce.

How can we address gender disparity at the individual level?

There is a major discrepancy between the way men and women on Wall Street see their workplace. Women are about twice as likely as men to say that they see their company’s management withhold opportunity or promotion from women. Simply put, men are less likely to recognize instances where women are disadvantaged in the workplace.

Male leaders must understand the role unconscious or implicit bias plays in the way they engage with those at our organizations. It takes self-awareness and courage to identify our own biases and make proactive changes to how we work and engage with our colleagues.

At Linkage, we’ve developed programming designed to empower leaders to lead inclusively across difference.

How can we address gender disparity at the organizational level?

In addition to individual development, organizations must take proactive steps to challenge gender imbalance. They must lift the veil on reality at their organizations.

Recently, Salesforce took a hard look at their numbers and has spent nearly $9 million to correct the discrepancy in pay between men and women. They’ve closed the pay gap—and Mark Benioff, Salesforce’s CEO, is also personally committed to making sure women at his organization have a seat at the table. He refuses to hold a meeting unless 30% of the attendees are women.

This work at the organizational level can be costly, but the payoff in retention of talent, growth, and increased profits, makes the decision an easy one for organizations looking to stay competitive.

Organizational change is like cleaning out your closet. As you pile up clothes and sort through unnecessary items, deciding what to keep and what to get rid of, you inevitably make a much bigger mess. But, once you clean out the “clutter,” you have a clearer perspective on what’s inside and what’s truly important.

The same is true of any organizational shift. Committing fully to advancing women leaders and encouraging gender diversity in all parts of your business may be challenging at first—but the payoff is simply too great to ignore. Who can afford not to take on this work?

Linkage partners with premier companies around the world to help them understand how their women employees perceive their company and identify the key areas for transformation to help attract, retain, and advance women leaders. Discover how the Advancing Women Leaders Organizational Analysis gives you access to leading indicators on your organization’s culture, talent systems, executive support of women, and leadership development for women.