Multinational investment bank and financial services giant Goldman Sachs recently announced a diversity rule stipulating that the bank will no longer take companies public unless they have at least one “diverse” board member. Presenting the new pledge at the World Economic Forum (WEF) at Davos, Switzerland last week, CEO David Solomon explained that the push for diversity will be woman-focused. However, in an official follow-up statement issued by the bank, the initiative will not be extended to the boards of companies looking to go public in Asia, a region that is particularly lagging behind in awareness and action on corporate diversity.
While Goldman Sachs’ campaign to increase the share of women directors and diverse members on corporate boards has been much applauded, it stops short of taking on the same challenge in Asia, which will be exempt from the bank’s newly announced diversity pledge. In an interview last week at the WEF held in Davos, CEO David Solomon revealed that the bank will no longer take companies public without at least one diverse member on the board, citing that those with at least one female director perform significantly better. In an official statement following Solomon’s interview, the bank confirmed that the rule will only apply to initial public offerings (IPOs) in the United States and Europe, while Asia, Latin America and the Middle East will be excluded.
Commenting on the exclusion of Asia, Fern Ngai, CEO of Community Business, the Hong Kong-based group promoting inclusive business practices, said: “Nowadays, there is no excuse for companies to have non-diverse, all-male boards. [Goldman] should include Asia. I don’t see why not.”
The spokesman for the bank reiterated that the pledge will be firstly applied in the United States and Europe, before considering whether similar moves should be implemented in Asia and other regions all over the world, citing that awareness about diversity has to improve over time through conversations with clients outside of the US and Europe.
Given how ubiquitous male-dominated corporate boards are in Asia, Goldman Sachs’ diversity pledge is effectively putting a break on the tracks to create the much-needed push for change in the region. According to data from American finance company and index provider MSCI Inc., a whopping 33% of firms in Japan have not even a single female board member, with Hong Kong and China only faring 1% better. By contrast, this figure stands at 1% for the United States. In California, legislation already exists to mandate board diversity in companies, which are backed up by penalties for noncompliance.
This means that the bank’s pledge will go so far to encourage those regions where companies are already taking a stance on increasing the share of women and diverse members in top-level decision-making, rather than instigating the movement where it is needed the most. Goldman’s track record in terms of improving diversity figures in Asian corporate boardrooms also indicates superficial commitment. The high-profile IPOs of Chinese electronics giant Xiaomi and food service behemoth Meituan Dianping in Asia, which Goldman Sachs had a leading role in both offerings, have no female representation on either of their companies’ boards.
As one of the biggest underwriters of IPOs in the world, Goldman Sachs has the capacity and responsibility to drive impactful change. However, their pledge, by excluding regions outside of the US and Europe, suggests that there is remains a huge diversity gap to strive towards filling in the future.
Lead image courtesy of John Wildgoose / Getty Images / Caia Image.