Nasdaq Pushes Board Diversity Measure
Nasdaq recently filed a proposal with the SEC to adopt new listing rules related to board diversity and disclosure. The new standards, Nasdaq said, 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. Meanwhile, the Wall Street Journal reports that efforts by Nasdaq and others may improve board diversity statistics though boards may need to work at avoiding a check-the-box mentality in order to reap the benefits of a diverse slate of directors.