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Goldman's Anti-Bro Pledge Isn't Just a Stunt

(Bloomberg Opinion) -- It’s easy to be cynical about the good intentions of a company caught up in one of the biggest frauds in history: the 1MDB scandal in Malaysia. Yet Goldman Sachs Group Inc.’s new stance on boardroom diversity shows how even the most profit-oriented of finance titans can — when pushed — further the virtues of stakeholder capitalism.

Speaking at the World Economic Forum in Davos, where global leaders vowed to save humanity from climate change, Goldman’s chief executive officer, David Solomon, set forth a vision for his bank’s role in imposing better governance on its clients. From July it won’t manage the initial public offerings of American and European companies unless they have at least one non-white or non-straight male board candidate, Solomon said (the focus will be on women). In 2021, he’s going to “move toward… requesting two.”

The move carries weight. Goldman is one of the top three IPO underwriters of the past decade, alongside Morgan Stanley and JPMorgan Chase & Co. It has an authority that wannabe public companies won’t be able to ignore.

Going public is one of the critical junctures in a company’s history. It’s the moment when a century-old, family-owned widget maker, an upstart venture capital-backed tech unicorn, or a state-controlled behemoth, sets out on a course that will define its role in society for years to come. Getting the composition of its leaders right at the start sets the standard for what a company expects of itself just as it embarks on what’s often a period of rapid growth.

Tech startups especially have been criticized for fostering a “bro’” culture that can be a hostile place for women, exemplified by Uber Technologies Inc. under the previous leadership of Travis Kalanick.

But it’s not just about staff and society; shareholders will also benefit, according to Solomon. Companies with more diverse boards score better on measures of sustainability — an issue that’s increasingly important for asset managers. Broader representation has also been associated with higher profits and performance, although the empirical data is mixed.

Goldman’s reputation could also use a little sprucing up, not only from the probes into its role raising money for the Malaysian investment fund 1MDB, but also around the subject of IPOs. It’s no coincidence that Solomon’s declaration follows two listing flops of epic proportions. Last year, his bank was one of the IPO underwriters for WeWork, which only added a female director after its first prospectus was pilloried. The deal was pulled eventually in part because of lingering governance concerns.

International investors also spurned the biggest IPO of all time, Saudi Aramco, in part over concerns about controls and governance. Riyadh punished Goldman and its ilk by relegating them to the second-tier behind local banks, paying them considerably less after scrapping roadshows outside the Middle East.

The two deals were embarrassments that Goldman will be keen to move on from by putting a more positive gloss on this part of the empire. What’s more, it’s unlikely to lose out on any big IPO business given the relatively modest ambition of its pledge. Of the listings managed by Goldman in the past two years in the U.S. and Europe, fewer than 10% had a board lacking a diverse candidate (many countries already enforce quotas). Half of the bank’s top-10 IPOs in 2018 and 2019 took place in Asia and the Middle East, regions not covered by Solomon’s promise.

By flagging the more ambitious two-person target for 2021 now, Goldman is giving clients time to prepare. It’s also shrewdly reading where the “environmental, social and governance” trend is headed. Its first mover advantage may win it admirers among more enlightened startup companies and executives who have been weighing direct listings as alternatives to costly IPOs.

It will take time for the “vampire squid” to shed its image as a pure opportunist, especially with 1MDB rumbling on. But whatever the motivation, pushing for greater diversity ups the collective pressure on other financiers to use their power for good. Over to you Morgan Stanley and JPMorgan.

To contact the author of this story: Elisa Martinuzzi at

To contact the editor responsible for this story: James Boxell at

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.

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