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by Derek Loosvelt | March 27, 2019


business meeting

Last week, DJ D-Sol, a.k.a. David Solomon, the CEO of Goldman Sachs, co-wrote an email that went out to all Goldman employees. The email outlined the firm's diversity-hiring goals, including aiming to boost representation in Goldman's analyst and associate classes to "50 percent women, 11 percent black professionals, 14 percent Hispanic/Latino professionals in the Americas, and 9 percent black professionals in the UK." The email also addressed increasing diversity at the firm's higher levels, outlining a new initiative that requires "two or more qualified diverse candidates" to be interviewed when Goldman's looking to fill a senior-level position.

Here are three takeaways from Goldman's new—and very aggressive—diversity initiatives.

1. D-Sol's tenure as Goldman CEO will not be smooth or quiet but will be interesting.

Solomon has no easy task as the leader and face of the most visible player in one of the most visible industries on the planet, a planet which is going through some of its most abrupt cultural changes in decades. That is, Solomon will have to steer the Goldman ship through some rough waters in the next few years. Which he's no doubt well aware of. The diversity email he co-wrote acknowledged that "fundamental change takes time." And indeed, it's going to take a fair amount of time to alter the makeup of the Goldman staff. Here's CNBC on what Goldman looks like today.

Goldman, like Wall Street overall, is dominated by white males, particularly at senior levels. About 60 percent of the bank’s U.S. employees are white, while 38 percent are female, 5.4 percent are black and 8.5 percent Latino, according to the firm’s most recent disclosure. When it comes to top managers, 80 percent are white, 22 percent are female, 2.9 percent are black and 4.3 percent are Latino.

Solomon and Goldman also need to deal with the gender pay gap, the disparity between what men and women earn for the same role. Goldman's diversity email went out to employees exactly one week before Goldman released its required U.K. gender pay gap disclosures, which revealed that the firm now pays women, on average, 50.6 percent less than male colleagues per hour in the U.K. In comparison, Goldman reported a 56 percent gap last year, and Credit Suisse and HSBC both reported higher gaps than Goldman this year. Which is to say the gap is a problem that not only Solomon and Goldman will have to deal with but other Wall Street CEOs and their firms will have to contend with as well.

And it will be anything but easy for all of them to make the drastic changes that need to be made to get to an equal wage for women. It's one thing to hire more women at the junior level, and quite another to retain them, promote them, and treat and pay them equally.

2. The talent war between Wall Street and Silicon Valley is real.

Goldman's diversity email came on the heels of another email sent by Goldman's senior leadership earlier this month. That email included details (but not too many details) about the new casual dress code at Goldman. That's right, Goldman officially went all-casual this month, or, as the email read, to "a firm-wide flexible dress code." The details of the code were vague. The email merely told employees to "exercise good judgment" and included this sentence: "All of us know what is and is not appropriate for the workplace." To which my immediate thought was: "We" do?

As for the reason for the relaxing of the code, employees were told that it had to do with "the changing nature of workplaces generally in favor of a more casual environment," as well as the firm's desire to be "the employer of choice for all." What the email didn't say but implied is that Goldman, whose tech employees already enjoyed a casual dress code before the email went out, has been increasingly competing with the big, prestigious tech firms like Apple, Facebook, and Amazon for talent; today, half of Goldman's employees are millennials, and a third work in a tech function. A relaxed dress code and casual environment will certainly help Goldman better compete with these firms, which have touted their casual environments for years.

Likewise, with diversity (as well as the ability to bring your whole self to work) also seen by top, young talent as a major plus in an employer, it's likely Goldman had its talent war with Silicon Valley in mind when creating its goals. 

3. Diversity is good for business.

All publicly traded firms, including Goldman, need to appease their shareholders. This means that Goldman isn't going to make massive strategic moves like setting these diversity goals if they make poor business sense. And so, you can be sure that Goldman understands that diversity is good for its bottom line.

Now, I know that there are many diversity-deniers out there, people who believe that, no matter what firms write in their internal or external emails, diversity is nothing but a PC/PR play. To those, I'd like to first recommend this McKinsey study, "which reinforces the link between diversity and company financial performance," and second, the below paragraph, which I came across last week in a podcast featuring Heidi Schreck, a playwright, actress, and TV writer with episodes of "Billions," "Nurse Jackie," and "I Love Dick" to her name. The podcast focused on Schreck's new play, "What the Constitution Means to Me" (the words below are Schreck's).

I think it's also obviously an argument for why we need more diversity in our government and on the court because, apparently, it's quite hard for us as human beings to fully imagine the circumstances of another person. So if you have nine white, cis-gender men on the court who apparently have trouble imagining what other people's lives might be like, you're going to get bad decisions. If you have a Congress and an executive branch that's made up of mostly these people, you're going to have bad laws ... You're going to have laws that don't take into account the realities of other people's lives.

I think it's also obvious, but I'll state it anyway: For the same reason a non-diverse court and Congress will result in bad laws, a non-diverse senior leadership team and staff will result in bad business decisions. In other words, Goldman didn't just set diversity goals, it set operating goals as well.

And to all of you diversity-supporters out there, you'll be pleased to know that where Goldman goes, the rest of Wall Street usually follows.