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The
proposal requires that companies have two diverse directors,
including one who identifies as female and another as an
underrepresented minority or LGBTQ+, or explain why they do not.
Companies also have to publicly disclose the diversity of their
boards.
"These rules will allow investors to gain a better understanding
of Nasdaq-listed companies’ approach to board diversity," said
SEC Chair Gary Gensler in a prepared statement.
Nasdaq said it is looking "forward to working with our companies
to implement this new listing rule and set a new standard for
corporate governance.”
Women and minorities have been underrepresented in the top ranks
of companies, leading to a recent reckoning on racial and gender
diversity in Corporate America. According to data from Equilar,
boards in the Russell 3000 are halfway to gender parity. In the
Russell 1000, 18.4% of directors are under-represented
minorities.
Investor efforts to scrutinize diversity on boards have also
been stymied by a lack of disclosure, with many companies not
detailing the gender and race or ethnicity of directors.
Republican lawmakers and some companies criticized Nasdaq's
proposal and urged the SEC to reject it, saying it would
interfere with boards' responsibilities to shareholders and
could impose new costs on companies.
Advocates for people with disabilities had pushed both Nasdaq
and the SEC to include disability in the proposal, but were
“rebuffed,” said Ted Kennedy Jr, chairman of the American
Association of People With Disabilities (AAPD), in an interview
with Reuters.
Nasdaq said in a comment letter that companies could consider
and disclose additional diverse attributes such as disability or
veteran status. But those attributes would not meet the
requirements for a female or person who identifies as an
under-represented minority or LGBTQ+.
California and Illinois have laws on board diversity for
companies headquartered in their states.
(Reporting by Jessica DiNapoli in New York; Additional reporting
by Chris Prentice in Washington, D.C. and Ross Kerber in Boston;
Editing by Jonathan Oatis and Matthew Lewis)
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