Comments (77)

Jan 24, 2020

I don't buy it. Just a sound bite to get some press. I'm certain that a meaningful number of private company boards are all male.

Jan 24, 2020

Easy enough to dismiss one board member if you want GS to take you public.

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Jan 24, 2020

or just go with JPM/MS

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Jan 24, 2020

Since the target date is July 1, I wonder which company they're taking public in June doesn't comply.

Anyhow, I'm sure this will turn into the typical arguments with the typical advocates on either side, myself included, but as the article states - the studies are clear - diverse boards and diverse leadership leads to better results. If you're in a business where results are paramount, and Wall Street certainly is, then it only makes sense to establish a framework that leads to a more likely occurrence of positive results.

If you get some good PR while doing so, as a hedge against a possible Warren or Sanders presidency, all the better. This is good leadership from our friend the DJ.

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  • Intern in IB-M&A
Jan 24, 2020

Diverse boards do better on average. From a statistical POV, there are plenty of instances when all white male boards perform better.

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  • Analyst 1 in IB-M&A
Jan 25, 2020

It's only brains that matter. It is what it is. Is your professor a raging liberal by any chance?

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Jan 27, 2020
Intern in IB-M&A:

Diverse boards do better on average. From a statistical POV, there are plenty of instances when all white male boards perform better.

Give this guy a Nobel Prize! He's a genius!

The day you can pick out exactly which boards will perform better... well, I'll know, because you'll make hundreds of millions if not billions of dollars. After all, you'll only invest in over-performing companies. Until that day, you seem to have misunderstood the whole point of an average

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Jan 24, 2020

the studies are clear - diverse boards and diverse leadership leads to better results

Is this a fact for companies looking to go public? Did Apple or Microsoft have diverse boards when they went public? Just curious how these stats are being massaged.

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Jan 24, 2020

@CRE That's a really good, balanced perspective. Good input. Correlation isn't always causation though. Are there clear links to the value that diverse board members provide? On a different tangent, is it right for a company to mandate this, or should it be in the company's hands to make this decision on behalf of their shareholders?

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Jan 24, 2020

Investment banks locking companies out of capital markets in order to force diversity will probably do more harm than good for diverse boards in the long run

Jan 25, 2020

eh?

Jan 25, 2020
CRE:

Anyhow, I'm sure this will turn into the typical arguments with the typical advocates on either side, myself included, but as the article states - the studies are clear - diverse boards and diverse leadership leads to better results.

Causality cannot be proved by the numbers.
What we see is a correlation between diverse board members and performance.

Playing devil's advocate, it could well be that only the most successful companies have money and time to squander on the diversity bandwagon. Diversity policies are a luxury.

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Jan 26, 2020

would be curious to see if this is just a correlation or causation effect, and see if that and how that impacts the managerial style within the company.

Jan 27, 2020

I think there is some legitimacy to this. What would the least cynical version of this look like?

Companies that are doing well, without having some genius "face of the brand" type founder/CEO person, probably tend to be egalitarian and quantitative rather than "fuck that guy I don't like that guy". Probably attracts more female employees with ambition and thus more get promoted etc. There are also probably certain industries where this is more the case. Also, the larger the company is then they do indeed have more wiggle room for fuckery, if you have 5,000 employees what's promoting a handful of diversity people not based on merit really going to do to the long term performance of the company?

Jan 26, 2020

.

Jan 24, 2020

fingers crossed it makes money i guess

Buying tesla weeklies is literally free money.

Jan 24, 2020

" Soloman said the performance of public offerings of US companies with at least one female director has been 'significantly better' in the last four years than those without"

Would be interesting to dig into that. It's vague enough that you can repackage the data to fit the narrative, but I sincerely doubt you can make a strong case for that.

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Jan 25, 2020
KClubs:

" Soloman said the performance of public offerings of US companies with at least one female director has been 'significantly better' in the last four years than those without"

Would be interesting to dig into that. It's vague enough that you can repackage the data to fit the narrative, but I sincerely doubt you can make a strong case for that.

All you need to know about this kind of ''studies'' is that the conclusion is already pre-dermined.

If companies with ''diverse'' (read more upper class white women) boards perform better, it's proof that diversity works.

If companies with diverse boards underperform, then... it's proof that the markets are sexist.
https://www.bloomberg.com/news/articles/2019-11-25...
Note the difference between the url and the title.
Fact: ''An analysis of 14 years of market returns across about 1,889 companies finds that when they appointed female directors, they experienced two years of stock declines. The market value of a given company fell 2.3% by adding one additional woman. The research was published in the Informs journal Organization Science.''
What do ''''''''''''''''''''''''researchers'''''''''''''''' say?

'' "If anyone is biased, it is the market," she said. In fact, Snellman said investors should consider organizations that add women and other under-represented groups to their boards "because there's a good chance that company is being undervalued."

There's simply nothing that data can do to demonstate the diversity argument wrong. It's either it's the best thing ever or there's racism and sexism that prevent diversity from delivering. No other possible conclusions allowed.

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Jan 25, 2020

Its truly amazing isnt it? Anyone reading that article you posted needs to take a minute afterward to reflect on how insane things have become

And anyone not seeing it as insanity should quit their job immediately and launch a fund that goes long companies with diverse boards and short the rest. If the studies are to be believed, this is easy alpha.

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Most Helpful
Jan 24, 2020

It should always be a red flag when a study avoids using the metric that is the most natural metric to use. Because when someone wants to find a positive correlation and has a long list of possible metrics, they can try one metric after another until one finally works.

Imagine if I told you a drug would make you lose body fat, and my clinical evidence showed that people who took it lost weight. You would (or should) immediately wonder why I couldn't demonstrate a loss of body fat when body fat is easily measurable. In fact, that wouldn't be skeptical enough. You should in fact conclude that my drug failed the body fat test.

So any time you see a metric that isn't the most obvious one, its a sign that the most obvious didn't work.

In this case, the studies use margin and profitability, which is a huge red flag because it is always standard practice for corporate governance studies to use stock performance. Seriously if you don't believe me, go look up any study you want relating to boards; corporate governance has been a favorite topic for academics in both law and business for nearly 100 years now. They all use stock performance.

You can take it to the bank that the folks behind these studies looked for a correlation on stock performance, and it didn't go well for them. So they went mining through different metrics until one finally worked. Bias 101.

And that shouldn't surprise you either, because the idea that a board's racial or gender makeup will affect performance is pretty clearly ridiculous on its face.

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Jan 24, 2020

Here's a good HBR article about it

and here's a posting by McKinsey

That doesn't mean it's a fact etched in stone, mind you, but don't be so ready to discount something simply because it doesn't align with your world view.

Edit:

Sorry, I missed this, @PteroGonzalez

PteroGonzalez:

And that shouldn't surprise you either, because the idea that a board's racial or gender makeup will affect performance is pretty clearly ridiculous on its face

Why is it ridiculous?

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Jan 24, 2020

I actually got my info from reading those articles when you posted them earlier. See I'm a listener!

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Jan 24, 2020

Maybe 'ridiculous' was a strong word to use. I was going for more of a burden of proof concept. As in, it is not natural to think that a team's makeup of skin tones and genders should have an impact on their performance. So a high burden of proof should be set . . i.e. I am going to assume that race/gender makeup is irrelevant until overwhelming evidence to the contrary.

I'm additionally skeptical because I'm all too familiar with the folks behind the whole board diversity thing. I know many of them personally and even more of them professionally. They are the governance folks at the pensions, institutions and large fund groups. They are not the least bit interested in better company performance. They just want more women on boards, and will pander to whoever they need to in order to accomplish that. They know they will only have credibility if they make a performance-based argument, so this is their attempt to do that.

As a deep value investor and light activist who actually cares a lot about improving company performance through better governance, I can name much bigger performance drivers that this "good governance" crowd doesn't give a damn about. Poison pills, staggered boards, CEO pay that's tied to growth instead of profit, CEO pay that doesn't properly incentivize risk, etc etc. I've spoke to many of these institutions and their research providers (ISS and GL) and presented them with overwhelming evidence of major performace impacts. So have activists far more famous than I'll ever be. But we are pretty much ignored because the governance community is run by non-finance, politically-oriented types who care more about the social matter of board diversity than they care about company performance.

Sorry for long post. To summarize: (i) I don't think there's good evidence of a performance impact and (ii) I'm not surprised to see that, because the folks behind this were never interested in performance.

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Jan 25, 2020

Finally, someone understanding statistics. McFuckingKinsey twists their results exactly the way they're paid to do. If they wanted to gather evidence for their theory, they should have falsified it, i.e. looked at "non-diverse", yet succesful companies (from which we have boatloads here in Germany, btw). That would have been scientifically accurate. Praise be to the Gods of Critical Rationalism!

Omnia facit Voluntas - Will alone suceeds

Jan 24, 2020

I have no problem at all with private companies engaging in free association. More power to 'em. I do genuinely wonder, however, how it can be legal under the Civil Rights Acts to consider immutable characteristics in business decisions, especially when it's an announced policy. If GS's policy was that it couldn't do business with an all-black board because it didn't have a white person or an all-female board because it didn't have a male member I can only imagine how fast a lawsuit would be filed.

Jan 24, 2020

i want to sue the goldman sachs

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Jan 24, 2020

Great point. They'll probably use whatever legal excuse the colleges have used to allow them to get away with discrimination in admissions. I believe in those cases the courts say the Constitution allows some discrimination for the sake of diversity. Apparently the Constitution has extra provisions in invisible ink that only judges can see, because I don't see it written anywhere.

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Jan 24, 2020
real_Skankhunt42:

If GS's policy was that it couldn't do business with an all-black board because it didn't have a white person or an all-female board because it didn't have a male member I can only imagine how fast a lawsuit would be filed.

It is a bit frustrating how "diversity," which I, perhaps unsurprisingly, truly believe has inherent benefits, has become a synonym for "non-white."

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Jan 24, 2020
CRE:
real_Skankhunt42:

If GS's policy was that it couldn't do business with an all-black board because it didn't have a white person or an all-female board because it didn't have a male member I can only imagine how fast a lawsuit would be filed.

It is a bit frustrating how "diversity," which I, perhaps unsurprisingly, truly believe has inherent benefits, has become a synonym for "non-white."

We all know exactly what is meant by having a "diverse" board member. It's not my fault that that is the reality. Like I said, I fully support freedom of association and if that's what they want to do then more power to 'em. I just don't see how it's legal to have an official policy of race and gender that literally excludes a business from accessing the capital markets without meeting some sort of racial/gender quota. That seems like the definition of institutional discrimination.

Jan 24, 2020
CRE:
real_Skankhunt42:

If GS's policy was that it couldn't do business with an all-black board because it didn't have a white person or an all-female board because it didn't have a male member I can only imagine how fast a lawsuit would be filed.

It is a bit frustrating how "diversity," which I, perhaps unsurprisingly, truly believe has inherent benefits, has become a synonym for "non-white."

The focus is on women. Including white ones, obviously.

  • Investment Manager in AM - Equities
Jan 26, 2020

Pretty crazy when you really think about it because white's are a global minority race

  • Analyst 1 in IB - Gen
Jan 24, 2020
real_Skankhunt42:

I have no problem at all with private companies engaging in free association. More power to 'em. I do genuinely wonder, however, how it can be legal under the Civil Rights Acts to consider immutable characteristics in business decisions, especially when it's an announced policy. If GS's policy was that it couldn't do business with an all-black board because it didn't have a white person or an all-female board because it didn't have a male member I can only imagine how fast a lawsuit would be filed.

Do people like you not realize the history of white people? This isn't a comment on the GS policy, I was just wondering if you're ever worried about your racist level. Gotta keep the worst part of ourselves in check.

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Jan 24, 2020
Analyst 1 in IB - Gen:
real_Skankhunt42:

I have no problem at all with private companies engaging in free association. More power to 'em. I do genuinely wonder, however, how it can be legal under the Civil Rights Acts to consider immutable characteristics in business decisions, especially when it's an announced policy. If GS's policy was that it couldn't do business with an all-black board because it didn't have a white person or an all-female board because it didn't have a male member I can only imagine how fast a lawsuit would be filed.

Do people like you not realize the history of white people? This isn't a comment on the GS policy, I was just wondering if you're ever worried about your racist level. Gotta keep the worst part of ourselves in check.

My business partner is an immigrant Chinese woman. My best friend is a Bolivian immigrant. The girl I'm presently going on dates with is black. I literally have a Star of David tattooed on my arm.

You can't guilt me into bad beliefs, especially not on the topic of race. You're not going to insinuate that I'm some sort of white supremacist without me laughing out loud.

Jan 26, 2020

White males make up 31% of the US population; the unconditional probability that a 7-seat board would randomly be all white men is ~0.03%. It'd be easy to argue that a company with a white-dude board probably hasn't tried particularly hard and potentially has a biased/discriminatory selection process for board members. "How many diverse candidates could have fulfilled this role?" "Did you consider any of them?" "Why/why not?"

p.s. Even if the people selecting the board aren't biased themselves (difficult to prove either way), they might be using criteria which proxy for discriminatory effects in society as a whole.

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  • Analyst 2 in RE - Comm
Jan 26, 2020

Nothing makes me happier than seeing logical arguments supplemented by statistics. Wish I could give more than one banana for this

Jan 26, 2020
iComeAnon:

White males make up 31% of the US population; the unconditional probability that a 7-seat board would randomly be all white men is ~0.03%. It'd be easy to argue that a company with a white-dude board probably hasn't tried particularly hard and potentially has a biased/discriminatory selection process for board members. "How many diverse candidates could have fulfilled this role?" "Did you consider any of them?" "Why/why not?"

p.s. Even if the people selecting the board aren't biased themselves (difficult to prove either way), they might be using criteria which proxy for discriminatory effects in society as a whole.

That is a total bastardization of statistics. There are so many holes in your reasoning that I almost don't even know where to start. Low-hanging fruit--pre-IPO companies shouldn't have 7 board members. It should be closer to 3 or 4 (Peter Thiel recommends 3), which completely changes the social and statistical dynamic of the analysis. It would be incredibly difficult to reflect the U.S. population among 3 board members

The other core problem with your statistic: There is no random selection of board members across a population.

Pre-IPO start-up companies tend to select board members who are part of their network (friends, family, acquaitances, former co-workers etc.), and people tend to have friendships and acquaintances that are disproportionately of their own race and sex; therefore, the pool of people to select for trusted board positions are likely to look like the founders. They will also reflect the industry's pool.

I've been part of two start-up companies, both with the same person--a Chinese woman. Not unsurprisingly, the people she has selected for the board and advisory roles are all Chinese and disproportionately female (given the male domination of the industry) and the people I selected were part of my network and they happened to be white males.

Further, pre-IPO tech company is going to select from a pool of talent that is not 50% male but closer to 80-90% male. A start-up commercial real estate company out of Connecticut is likely to be selecting from a pool of talent within its own network that is overwhelmingly white and male. To reiterate this point, there is no random selection of board members across a population. Your argument is sophomoric at best, dishonest at worst.

Jan 26, 2020
iComeAnon:

White males make up 31% of the US population; the unconditional probability that a 7-seat board would randomly be all white men is ~0.03%. It'd be easy to argue that a company with a white-dude board probably hasn't tried particularly hard and potentially has a biased/discriminatory selection process for board members. "How many diverse candidates could have fulfilled this role?" "Did you consider any of them?" "Why/why not?"

p.s. Even if the people selecting the board aren't biased themselves (difficult to prove either way), they might be using criteria which proxy for discriminatory effects in society as a whole.

Ever figured that those who sit on the board now started their careers 20-30 years ago or more and back then the composition of the population was quite different?

You want the distribution of those who are advanced in their careers and reflect the distribution of the past to match the distribution of those who start now?

If you can't understand ergodicity then you should never be allowed anywhere near probability.

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Jan 27, 2020

This kind of number illiteracy is why statistics 101 should be mandatory. Sure 31% of white males make up the US population.

Have you considered that the set we're looking at is not the US population but board seats? Your number implies that everyone in the US fits the criteria for a board seat including toddlers, criminals, people w/ no education, crackhead hoe's etc..

Jan 24, 2020

Still waiting for @Lloyd BIankfein" to weigh in.

Jan 24, 2020

As a particachal sexist and mysigoynistic innately racist white male, I am not in a position to weigh in. Why don't we instead amplify the voices of less privileged people of color, homosexuals and quadriplegic athletes instead?

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Jan 24, 2020

There is definitely a trend in the past 5 years or better, that shows board composition is changing in response to stockholder pressures.

Index funds like BlackRock, Vanguard and State Street have been voting more and more against companies with a lack of board diversity as well as those with excessive tenure and overboarded directors.

ESG-related stockholder proposals have also been increasing over the last few year, regardless of whether ESG might directly effect investment or deal-making decisions.

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Funniest
Jan 24, 2020

Nice, I might get a board seat now.

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Jan 24, 2020

People are too quick to throw monkey shit on this board.

I laughed

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  • Analyst 1 in IB - Gen
Jan 25, 2020

So does "diverse" include Asians? Funny how it almost never does.

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  • Intern in HF - RelVal
Jan 25, 2020

Salt on my wounds brother

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Jan 25, 2020

This but unironically. You guys think that the proportion of board members who are Asian/Indian keeps up with the proportion of employees who are? The bamboo ceiling is real.

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  • Intern in HF - RelVal
Jan 26, 2020

Interesting point, the study said they need to put 70% more applications to get the same number of callback (even for normal jobs)
My personal yield over six months was something like 10 callbacks, 5 interviews over 1200 applications and 0 offers.

Jan 27, 2020

Employees in tech, finance, and consulting are disproportionately more likely to be South or East Asian than the general population makeup would suggest. Board members and C-suite executives are disproportionately less.

And then of course there are the Southeast Asians, who... well. Look up Ali Wong's bit on Jungle Asians vs Fancy Asians. Or watch Gran Torino.

Jan 27, 2020

@AndyLouis can we merge these threads?

https://www.wallstreetoasis.com/forums/goldman-sac...
TLDR - it's posturing, no S&P 500 cos would be punished by GS for this, and doubtful any potential IPO candidates would do this. GS is doing this for PR, nothing more

Jan 27, 2020
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Jan 27, 2020
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"Work ethic, work ethic" - Vince Vaughn
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