Goldman Sachs Will Refuse IPO If Board Is All White, Straight Men

Channel: Bloomberg Technology
Published: 01/27/2020

Description
Jan.24 -- Goldman Sachs Group Inc. Chief Executive Officer David Solomon issued the latest ultimatum Thursday from Davos. Wall Street's biggest underwriter of initial public offerings in the U.S. will no longer take a company public in the U.S. and Europe if it lacks a director who is either female



Transcript
It seems like this could be real change. Goldman has significant influence. They were the top us underwriter last year, one of the top three in the last decade. This is more than a pr stunt. What do you think yeah? Well, even if there's never an ipo, they refuse to do that. What they're, probably gon na do is make every. I appeal that wants the goldman to underwrite it to have a diverse board. I m ...
an, i think, that's what's more likely to happen. They'Re going to you know the tails gon na wag the dog into doing what it wants done rather than having to refuse business. So i think it's kind of pr, but it's also a real ultimatum, that that they'll be a little in force before the company goes public well, and we should make this clear it's in the us and europe to start so abby. I want to fold you in because the interesting thing here is that you're seeing a lot of ipos come in the tech space, so this could have some significant ramifications. If you will for the tech sector yeah.

That'S that's right. Taylor. I mean i think there the pressures been building for quite a while for people to pay attention to a lot of the esg issues and diverse boards is certainly at the lead of that, and i think what we're seeing is, as it relates to technology, where there's A lot of companies that are built up over time that aren't paying attention to these issues, all of a sudden, the spotlights on them and they're, really gon na, have to step up and pay attention to these pressures that they're getting from all different sides and now Be it was interesting, you know we're talking about. You know having an all-white all straight male board, but the definition of diversity is changing as well. It'S not just including women. Now, how do you see them also trying to include more diversity in the corporate boards right? So you know, as we were talking earlier, the gender diversity is gotten most of the attention. First of all, it's easier to tell when you're looking at an s-1, usually, but also, i think it's because it was so disproportionate. When you look at our society. Employees, customers, shareholders, the disproportionate gender issues. However, there's a lot more attention being paid to different types of diversity, which is a lot to do with wise diversity, important begin with, and the value of diversity being more around bringing in other perspectives and having a good constructive. Maybe a debate, but nonetheless a healthier, more value added to that board when you look at it through a few different lenses and that's where diversity really matters and jeff, you were taking a look at this story, david solomon saying, of course, focusing on july. First on the us and europe, but notably excluding asia, and we talked about technology, a lot of the big tech.

A lot of the big tech ipos are coming from. Asia is goldman sachs, maybe not going far enough by excluding asia from this conversation. Well, a majority of their businesses in the us and europe, so they're kind of hitting their core and ages complicated them. If you think about it by the criteria they set. Every board in asia is already diverse because it has a predominance of asian people on it, which, in the u. s. counts as diverse. So when you start to talk about diversity outside of the us, it looks a lot different because we look at race. Most of the rest of the world does not consider race the same way that the u. s. does, and you know, as you were saying, for most of the world. Gender is the diversity, but you know by that measure.

Asia still looks pretty bad, so i mean if they were to extend this to asia. I'M gon na guess, there's gon na be more ipos. That would have trouble and maybe more resistant to this, which is maybe why it's taken a little longer for them to bring asia in and jeff. I wanted to get your thoughts. We talked about now, including diversity in the ipo stage. What about before that moment? The founding of these companies: how do we start to include this before we get to the ipo stage? Well, you got to figure out how to fix funding. I mean when you look at the just the scarce amount of money, that's available from diverse funds. To begin with, and i mean pretty much, all the research suggests is how a fun starts out or how a company starts out is how they're gon na end up. So if a company starts out with five men, it's gon na look a lot like that three years from now, if you don't have women sort of joining at the at the beginning, if they're not empowered or they're, not getting funded. To start these companies you're really not gon na see much difference three four or five ten years from now, and that's that's been borne out repeatedly now. So it's it's kind of like got to be right from the not just from pre-ipo but from foundation. The founders have to be more diverse, a be your take on that yeah.

I think you and jeff are are going into a really interesting part about all of this, so we looked at the last dozen ipo is just you know in 2020, or what's queued up to go in the next week or so. What sort of phenomenal is in those dozen ipos there's only one company where they've had two women on the board for more than a year, all the rest of them have women that are teed up to be nominees upon the completion of the ipo or have gone On when the within the last couple of months - and i think what's really important - is just checking the box and putting a woman or any kind of diverse person on a board falls way short of what the whole point is about. Having diverse boards and what's interesting, abi's, you take a look at the s & p 500. It seems like some of these multinational, larger cap companies have actually done a better job than some of these smaller startups, where maybe there is a bit of a sense of checking the box to get to the ipo? Why is it that some of these multinational companies are doing a better job, and yet some of these startups, which is supposed to be an innovative culture, can't get there? I think it's all about visibility. You know, pressures on you've got you know a broader shareholder base. I think the work of state street and blackrock and vanguard is really sort of coming in to bear, and, if you think about who picks the board, it is the shareholders right. So go back to jeff's earlier point of how these companies are being founded, who's behind them. We need to start at that level at that earlier stage level and by the way, bringing more diversity on to your board two years, three years, four years before you go, public is going to help that company be more ready to be public. So there's really a win-win. You take a look yeah. Please comment, i would say a key part of this. Is this: is sort of the equivalent of blackrock or vanguard, saying we're not going to vote for your boards anymore.

Now you have this sort of line in the sand for the ipo, so companies are going to be thinking. What do i need to do two or three years from now to go public? I better be thinking about it now and i think goldman learned something from we work. I mean they were part of that, and that was a disaster. They came to the market with without a without a diverse board, and people start asking questions and then more questions and pretty soon, there's no ipo jeff, who is next goldman after goldman, who had morgan stanley jp morgan? Who do we expect to come out next? I don't know i asked both jp morgan and morgan stanley and they weren't volunteering it. If you think about it, we have citigroup, put out some some pay numbers. We had intel put out some really detailed numbers about their workforce and gender and race and pay that no one's ever done before and they're still the only ones to have done that so just because somebody leaves does not mean somebody's gon na follow. This is scary. Stuff, i mean if you look at my inbox, my twitter feed my linkedin and probably many other people who follow this. It'S pretty pretty scary to see the kind of reaction to what they did. Abi your take yeah, so i'm gon na trust, geoff's reporting. He asked all of them, but i want to know who's first on the investor side, who's gon na step up and say we will not buy an ipo that doesn't have the type of diversity. You know the same way that blackrock came out just two weeks ago.

Larry fink's letter that said climate change, we're paying attention to this. I'M really looking forward to seeing the institution say this matters so much that we're not in without doing it. The right way brings us back down to activism coming from all different fronts:.


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