One of the key barriers to widespread pay equity is the lack of female and minority representation in leadership roles.
There’s also been research that indicates organizations with more diversity throughout, especially in leadership roles, tend to outperform those bereft of it.
Goldman Sachs CEO David Solomon is subscribing to this notion, as he announced late last week that the investment bank will refuse to take a company public unless it has at least one woman or minority board member.
Solomon’s rule, which will go into effect on July 1 in the United States and Europe, comes at a time when there is heightened awareness about the lack of progress being made with women and minorities in the boardroom and C-suite. According to the MIT Sloan School of Management, about one in five board seats are occupied by women among companies in the S&P 500.
“Broader and intentional representation of underrepresented groups is essential if you want to remain competitive and relevant in today’s marketplace,” said Scott Cawood, president and CEO of WoldatWork. “Bold moves like the one demonstrated by Goldman Sachs shows the power the business community can have in driving social change and I welcome more leaders to follow suit.”
Tracy Bosch, an associate client partner at Korn Ferry, said in an interview with WorldatWork for a January 2019 Workspan magazine feature that increasing female representation in the C-suite starts at the top.
“Improving women's representation in the C-suite needs to be a priority at the board level for us to see real progress,” Bosch said. “Motivation for boards to take that seriously is increasing with pressure from investors, customers, employees and legislation.”
Measures such as the one taken by Goldman Sachs would figure to help facilitate this movement. It’s the second significant measure on this front, as California passed a similar law in 2018 that requires at least one female director on the board of each California-based public corporation. And, at the end of 2021, organizations with six or more board members must include at least three female directors.
Another benefit, according to research, is that having women on the board results in better acquisition and investment decisions and in less aggressive risk-tasking, yielding benefits for shareholders. One potential reason for this is that having female board members helps temper the overconfidence of male CEOs, improving overall decision making for the organization.
About the Author
Brett Christie is a staff writer at WorldatWork.