Nasdaq Files SEC Proposal to Advance Boardroom Diversity
Building on its commitment to creating a more inclusive economy, Nasdaq has filed a proposal with the U.S. Securities and Exchange Commission (SEC) to adopt new listing rules related to board diversity and disclosure. These new standards are intended to provide stakeholders with a clearer understanding of a company’s board composition and enhance investor confidence that all listed companies are considering diversity in the context of selecting directors.
Under the proposal, most Nasdaq-listed companies would be required to have, or explain why they do not have, at least two directors with diverse backgrounds, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ. All companies listed on Nasdaq’s U.S. exchange would also be required to publicly disclose consistent, transparent diversity statistics regarding their board of directors. If the proposal is approved, all Nasdaq-listed companies will need to report board-level diversity statistics through Nasdaq’s proposed disclosure framework within one year. The timeframe to meet the minimum board composition expectations set forth in the proposal will be based on a company’s listing tier, ranging from two to five years.
As part of the rationale for the new requirements, Nasdaq’s proposal included an analysis of over two dozen studies, finding an association between diverse boards and better financial performance and corporate governance.
“Our proposal is more than a social good; it is a business imperative. We believe that while change must come at all levels of an organization, setting a standard for diversity at the board level is one of the most essential places to start,” Nasdaq Stock Exchange President Nelson Griggs wrote for Yahoo Finance.
In addition to the proposal, Nasdaq is partnering with corporate leadership data solutions provider Equilar to assist Nasdaq-listed companies with board composition planning challenges. By leveraging the Equilar BoardEdge platform, which hosts nearly one million profiles, the Equilar Diversity Network and the Nasdaq Center for Board Excellence, Nasdaq-listed companies will have access to a larger community of diverse, board-ready candidates.
“Our goal with this proposal is to provide a transparent framework for Nasdaq-listed companies to present their board composition and diversity philosophy effectively to all stakeholders; we believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America,” Nasdaq President and Chief Executive Officer Adena Friedman said in a statement.
If the proposal is approved, Nasdaq would become the first major U.S. stock exchange to require diversity in the boardroom. The proposal builds upon Nasdaq’s Purpose Initiative, which strives to advance inclusive growth and prosperity, and its Commitment to Equality, which led to Nasdaq’s enhanced diversity disclosures this year.
“Nasdaq believes that capitalism must be cooperative to be successful. We are encouraged to see so many companies and shareholders embrace the idea that diversity isn’t just a social imperative, it’s also core to their long-term success. We’re all in this together, and the time for action is now,” Griggs said.
Nasdaq's Diversity Proposal
A proposed listing rule that would require Nasdaq listed companies on its US exchange to disclose its board composition and to have or explain why they do not.
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