Nasdaq will require more diversity on listed company boards
Nasdaq plans to require more diversity on boards of directors.
Under its proposed rules, most companies listed on Nasdaq’s U.S. exchange would have to include at least one director who identifies as female and one who identifies as an underrepresented minority or LGBTQ, Nasdaq said in a statement Tuesday. About a quarter of its listed companies currently meet the proposed standard, according to the exchange, which is seeking approval for the plan from the U.S. Securities and Exchange Commission.
“Nasdaq’s purpose is to champion inclusive growth and prosperity to power stronger economies,” Nasdaq Chief Executive Officer Adena Friedman said in the statement. “We believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”
Companies are under increasing pressure from investors and advocates to improve diversity in their top ranks and be more transparent about the makeup of their workforces. In a recent survey, 25 of the biggest companies in the U.S. were willing to make public a copy of a form presented to the Equal Employment Opportunity Commission that gives the racial breakdown of their staff.
Nasdaq’s proposed rule would also require listed companies to disclose diversity statistics for their directors. Foreign companies or smaller firms could satisfy the requirement by including two female directors.
The plan intends to give stakeholders a better understanding of board composition and enhance investor confidence, Nasdaq said. As part of the rationale for the new requirements, it presented more than two dozen studies linking diverse boards with better performance and governance.
All firms are expected to have one female or minority director within two years of SEC approval, and have more time to add the second diverse board member, depending on which Nasdaq market they’re listed. Companies that can’t meet the targets on time won’t be subject to delisting if they provide a public explanation, Nasdaq said.
“Nasdaq is heeding the call of the moment,” Anthony Romero, executive director of the American Civil Liberties Union, said in the statement. “Incremental change and window-dressing isn’t going to cut it anymore as consumers, stakeholders and the government increasingly hold corporate America’s feet to the fire.”