December 2, 2020
Authored by: Vicki Westerhaus, R. Randall Wang and Katherine Ashton
Nasdaq yesterday announced a proposed new listing rule that would require all Nasdaq-listed companies to publicly disclose consistent, transparent board diversity statistics in a specified form of matrix. In addition, the proposed rule would require Nasdaq-listed companies to have, or explain why they do not have, at least two diverse directors: one woman and one person who self-identifies as either an underrepresented minority or LGBTQ.
Nasdaq believes its proposal would benefit investors and the public interest, citing in its SEC filing numerous empirical studies as support for its finding that diverse boards “are positively associated with improved corporate governance and financial performance.” It also noted calls for diversity from institutional investors, corporate stakeholders and legislators.
If the rule is approved by the SEC, companies would be required to disclose board-level diversity statistics within one year of the SEC’s approval of the listing rule. In addition:
- All operating companies will be expected to have one diverse director within two years of the SEC’s approval of the listing rule (non-operating companies, such as asset-backed issuers, cooperatives, limited partnerships and investment management companies, as well as certain specified issuers of non-equity securities, would be exempt from the proposed rule).
- Companies listed on the Nasdaq Global Select Market and Nasdaq Global Market will be expected to have a second diverse director within four years of the SEC’s approval.
- Companies listed on the Nasdaq Capital Market will be expected to have a second diverse director within five years of the SEC’s