Nasdaq to Corporate America: Make Your Boards More Diverse or Get Out


The rule, which must be approved by the Securities and Exchange Commission to go into effect, would require companies to have at least two diverse directors, including a woman and a member of an “under-represented” minority group, including black people. , Latinos or members of the LGBTQ + community. Small businesses and foreign companies on the stock exchange could bow to two female directors.

Companies would also be required to disclose “consistent and transparent statistics on diversity” regarding their boards of directors. Assuming they’re approved, the rules would require at least one diverse director within two years and two within four to five years, depending on the size of the business. A company could have its shares delisted from the exchange if it does not comply.

“The purpose of the Nasdaq is to champion inclusive growth and prosperity in order to propel stronger economies,” said Adena Friedman, CEO of Nasdaq. The Nasdaq proposal presents an analysis of more than two dozen studies that have found an association between various boards of directors and better financial performance and better corporate governance.

The exchange joins a growing group of voices campaigning for greater diversity in conference rooms. In September, California Governor Gavin Newsom signed a law that would require at least one minority member to sit on the boards of all publicly traded companies based in California. And in January, Goldman Sachs (GS) announced that it would not take a company public unless it has at least one diverse board member.

Many large public companies already comply with the minimum requirements of the Nasdaq rule. In fact, four of the five largest companies on the stock exchange in terms of market value – Apple (AAPL), Microsoft (MSFT), Owner of Google Alphabet (GOOG) and Facebook (FB) – have boards on which straight white men are in the minority.

Two other companies in the top ten – Comcast (CMCSA) and Adobe (ADBE) – have women or minorities on half of their boards of directors. And the third largest company, Amazone (AMZN), has five women, two of whom are from a minority group, among its 11 members.

A Nasdaq spokesperson said he estimates that at least 85% of its 3,249 listed companies already meet the rule’s first criteria, having either a female or an under-represented minority on their boards. .

But boards of directors are still a bastion of white male power in corporate America. A September study by ISS ESG, the responsible investment arm of Institutional Shareholder Services, found that only 16.8% of 33,000 large-cap directors belong to a minority group and only 27.4% of directors. are women. And 55 of the 496 large-cap companies measured by ISS ESG, or 11%, did not have diverse directors.

But there are criticisms of the push to demand even minimal diversity on boards. Conservative group Judicial Watch filed a lawsuit in September to block California law requiring at least one minority director on publicly traded companies based there.

“The California government has a penchant for quotas that are blatantly unconstitutional,” Judicial Watch chairman Tom Fitton said. “Gender quotas and now new quotas for many other groups for boards are slaps in the face of the core American value of equal protection under the law. ”


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