Goldman Sachs Group Inc.’s asset-management business will vote against big companies that don’t have a minimum number of female and minority board members as of next year in a decision that could affect thousands of companies.
Beginning in March 2022, Goldman Sachs Asset Management LP (GSAM) will require companies globally to have at least two women on any board with more than 10 directors. Its policy at present requires one female director.
For S&P 500 index and Financial Times Stock Exchange 100 Index companies, GSAM will also require at least one director to be from an underrepresented minority group.
For companies that don’t comply, GSAM will vote against members of the board’s nominating committees. In the U.S., it will vote against all board members if the company has no female directors.
The tougher standards could affect about 2,500 companies worldwide if they take no action to add women to their boards by March, GSAM says. Currently, there are 12 companies listed on the S&P 500 that don’t meet the requirement to have one minority board member, the company adds.
With its new voting policy, GSAM joins other asset managers and countries in pushing companies to rid themselves of all-male boards.
RBC Global Asset Management Inc. announced last year that it would vote against all members of the nominating or governance committees at the annual meetings of businesses for which women did not make up a quarter of the board.
France and Germany have established quotas for women on boards. Stock exchange Nasdaq Inc. is bringing in requirements for its listed companies to have two diverse directors, including one female and one from an underrepresented minority.
GSAM, which manages more than US$2-trillion of assets, is pushing for board diversity because it believes this will benefit shareholders, says Katie Koch, co-head of the fundamental equity business.
“We believe diverse teams outperform,” she says. “[Diversity] is a very powerful tool for unlocking shareholder value.”
As of the third quarter of this year, 26.1 per cent of Russell 3000 Index directors were women, up from 25.2 per cent in the second quarter, according to Equilar Inc., a consultancy. It says 96 Russell 3000 boards had no women, the first time there had been fewer than 100.
In January 2020, David Solomon, Goldman Sachs’ chief executive officer, said the group would not take a U.S. or European company public unless the company had at least one diverse board member.