- Goldman Sachs Asset Management says they will vote against directors if a company’s board lacks women.
- The move may have a bigger impact in countries where there are few women on boards of directors.
- Move reflects a recognition by boards, executives and investors of diversity in creating shareholder value.
Goldman Sachs’ fund-management unit plans to vote against directors if a company’s board lacks women, part of a push to make sure every company has at least one female director as the bank seeks to join rivals adopting socially-responsible practices.
The move by Goldman Sachs Asset Management may have a larger impact on countries outside of the U.S., where about 20% of corporate board members are women. In Japan and other countries, the percentage of women on corporate boards is much smaller.
“The era of the male, pale, and stale board of directors is over,” Nell Minow, vice chair of ValueEdge Advisors, told Karma. “Study after study has documented the benefits of board diversity, and that means not just one woman or POC on the board but a proportionate mix.”
Goldman’s latest move expands the firm’s push for greater diversity in the corporate world. In January, CEO David Solomon said it will only take companies public if they have at least one woman or person of color on board. BlackRock and State Street have also pushed for more diverse leadership at the tops of companies.
Still, Katie Mehnert argues that Goldman’s moves are “misguided” and “potentially damaging.” Mehnert, CEO of Pink Petro, a company focused on pushing the energy industry to hire more women, argued in the Harvard Business Review that Goldman’s actions are unlikely to drive real change. Mehnert explains that focusing on the board of directors is something of a head fake and change needs to focus on a company’s entire workforce.
“Businesses cannot simply insert a woman into a board of directors and claim to stand for gender equality and diversity,” she writes. “Doing so is a fig leaf. If a company is genuinely committed to gender equality and diversity, that commitment will show up in its metrics at all levels.”
She points out that over the past decade, energy companies have doubled the number of women board directors, reaching 14%, while the share of women working in the industry, about 22% worldwide, has barely changed.
Goldman’s announcement is part of a broader push by asset managers to get U.S. boards to include more female directors. Many ESG investors have voted against nominating committees that lack diversity.
Goldman casts more than 11,000 proxy votes a year. Last year, the first time that every company in the S&P 500 had a woman on their board, Goldman voted against board members in 214 companies with all-male directors. Since then, 79 of those companies added a female board member, according to Bloomberg News.
“We really believe diversity of thoughts on boards drives better outcomes,” Katie Koch, co-head of the fundamental equity business at Goldman Sachs Asset Management, told Bloomberg.
Minow notes that Goldman’s decision comes in a climate in which a significant number of CEOs and other senior executives have been fired for #metoo issues, showing why it is essential to have a culture of gender equity that starts at the top.
“As boards, executives, and investors recognize the vital importance of recognizing the importance of employees, customers, suppliers, and the community to creating sustainable shareholder value, the importance of a board that reflects the diversity of those communities is essential,” she says.
In 2018, California became the first to require every public company in the state to have at least one female director by the end of 2019 or face a fine. The number of California-based companies in the Russell 3000 index with all-male boards dropped to seven by the end of last year.
“This is a purely market-driven decision, as is to be expected from Wall Street’s most powerful player,” Minow said.
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