DealBook: Goldman’s Playbook for More Diverse Corporate Boards

Jay OwenSRI/ESG News, Transforming Finance

January 24, 2020

Good morning from Davos, Switzerland, where the World Economic Forum is wrapping up. (Was this email forwarded to you? Sign up here.)

David Solomon of Goldman Sachs.  Denis Balibouse/Reuters

Goldman issues an ultimatum to drive corporate diversity

Goldman Sachs’s C.E.O., David Solomon, prompted chatter on Wall Street yesterday about his plan to require I.P.O. clients to have at least one “diverse” board candidate before the bank helped them list in the public markets.• “We’re not going to take a company public unless there’s at least one diverse board candidate, with a focus on women,” Mr. Solomon told CNBC at the World Economic Forum in Davos.• The mandate starts July 1 for U.S. and European clients, and starting next year, Goldman will require two diverse board members.• “We might miss some business, but in the long run, this I think is the best advice for companies that want to drive premium returns for their shareholders over time,” Mr. Solomon added.

It’s a big deal in the I.P.O. world, given that Goldman was the top underwriter of U.S. offerings last year.

And it’s the latest push for diversity within Corporate America, Jeff Green of Bloomberg notes. The money-management firms BlackRock and State Street plan to vote against directors at companies without a female director. And California-based public companies with all-male boards face a $100,000 fine.

Mr. Solomon’s decision is a change for Goldman, Liz Hoffman of the WSJ points out. The firm had previously argued, as an underwriter of WeWork’s I.P.O., that it would simply let investors decide if they liked a company’s board.

The big questions: Will rivals like Morgan Stanley and JPMorgan Chase follow suit? And how firmly will Goldman stick to this new rule?

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Today’s DealBook Briefing was written by Andrew Ross Sorkin in Davos and Michael J. de la Merced in London.

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Greta Thunberg speaking at the World Economic Forum this week.  Manuel Lopez/ World Economic Forum
At Davos, Big Business is eager to appear woke
Goldman’s announcement was just one of several initiatives that companies announced at the World Economic Forum to show that they were committed to social change.
Business leaders sought to demonstrate their environmental credentials, with many announcing plans to sharply cut their companies’ carbon footprints. BlackRock’s Larry Fink even wore a scarf representing the pace of global warming.
“Revolutionary sentiments” erupted in unexpected places at the forum, Tim Wu writes in an NYT opinion column: At times he thought he “had mistakenly wandered into a business-casual Bernie Sanders rally.”
But there are reasons to be skeptical:
• Many companies haven’t outlined how they will fulfill their climate pledges.
• Phumzile Mlambo-Ngcuka, executive director of the U.N.’s gender-equality program, warned against “the illusion of change” at the forum, Politico reported.
The Davos roundup:
• George Soros pledged $1 billion to create an international network of universities to promote an appreciation of “personal autonomy.”
• The investor Bill Browder, an outspoken critic of President Vladimir Putin of Russia, said he was warned of potential threats to his safety before he left for Davos.
• Treasury Secretary Steven Mnuchin said that Greta Thunberg should take a college economics class before resuming her climate change activism. She clapped back on Twitter.
Staff members at a hospital in Wuhan, China, this month.  Darley Shen/Reuters
The Wuhan coronavirus crisis is getting worse
The Chinese authorities reported a sharp increase in the death toll from the outbreak this morning, while more countries are investigating potential cases of infection. It’s stoking fears of another SARS-like disaster.
Here’s the latest:
• The Chinese National Health Commission has reported at least 25 deaths — up by more than a half-dozen in 24 hours — and 830 confirmed cases.
• Beijing expanded travel restrictions to a total of 12 cities, while Wuhan, the center of the epidemic, remains almost completely locked down.
• But experts say that the travel restrictions will do little to stop the virus’s spread outside China, Chris Buckley and Javier Hernández of the NYT report.
The economic effects are still being felt, Alexandra Stevenson of the NYT writes. The Hang Seng Index in Hong Kong was down 2 percent this morning, while Asian markets fell broadly yesterday. And the outbreak may hurt consumer confidence in what’s normally a busy spending season.
It’s still unknown how quickly China can contain the outbreak. While the World Health Organization declined to label it a global health emergency yesterday, it will revisit that decision in 10 days.