The Nasdaq Stock Exchange seeks American authority to demand more diversity on the boards of directors of companies listed on the Nasdaq, or for those companies to explain why they cannot.
It is the first major exchange to pursue such a requirement.
The proposal filed Tuesday with the U.S. Securities and Exchange Commission, if approved, would require all publicly traded companies to publicly disclose consistent and transparent statistics about the diversity of their board of directors.
Most Nasdaq-listed companies would need to have, or explain why they don’t have, at least two diverse directors. This includes one board member who identifies as a woman and another who identifies as an under-represented minority or LGBTQ. Foreign and smaller reporting companies would benefit from additional flexibility.
The boards of directors are predominantly white and male.
According to the 2018 Board Diversity Census of the Alliance for Board Diversity and consultancy firm Deloitte, women held just 22% of Fortune 500 seats in 2018, up from 20% a year earlier and 16%. % in 2010. White males held 66% of Fortune 500 board seats in 2018. Blacks held nearly 9% of seats in 2018, up from nearly 8% in 2010.
“We are taking the leadership here because there has been so little action on this front, and we think it is an important thing for us to do, to create a more inclusive capitalist society and we think it is. is a step forward ””. CEO Adena Friedman told CNBC. “But we would be happy if the New York Stock Exchange and the SEC also play an active role here.”
Companies that do not meet the diversity requirement will not be removed from the Nasdaq list, Friedman said, but they will need to outline the barriers to doing so.
The Nasdaq contains all the companies that trade on the stock exchange, more than 3,300 of them. It is dominated by technology companies, but there are also many financial, biotechnology and industrial companies. It is the second largest stock exchange in terms of market capitalization, behind the New York Stock Exchange.
Nasdaq said the aim of the proposal was to give stakeholders a better understanding of the current composition of a company’s board of directors and to build investor confidence that all listed companies are considering the diversity when looking for new members.
The proposal would require all Nasdaq-listed companies to publicly disclose board-level diversity statistics through the disclosure framework proposed by the Nasdaq within one year of the SEC approval of the rule. registration.
All companies are expected to have a diverse director within two years of the SEC approval of the listing rule. Companies listed on the Nasdaq Global Select Market and the Nasdaq Global Market are expected to have two miscellaneous directors within four years of the approval of the listing rules. Companies listed on the Nasdaq Capital Market are expected to have two miscellaneous directors within five years of SEC approval.
Companies that cannot meet board composition goals within the prescribed time frame will not be subject to delisting if they provide a public explanation of why they did not meet the goals.
The Nasdaq began in 1971 with the world’s first electronic stock market. It currently has over 4,000 business listings on its stock exchange. The Nasdaq has been a destination for many tech companies, including Apple, which launched its initial public offering on the stock exchange in 1980. Some other tech companies are drawn to Microsoft, Cisco, Amazon and Google, which is now a part of Alphabet.
The Nasdaq appointed Adena Friedman as CEO in 2016, the first woman to head a major US stock exchange.