March 1, 2021
Authored by: R. Randall Wang and Katherine Ashton
On Friday, Nasdaq submitted a revised proposal that addresses board diversity membership for listed companies. As discussed in our prior alert, Nasdaq had originally called for public companies – over a two-to-four year phase-in period — to include two diverse directors on their boards and to disclose in a “diversity matrix” certain anonymous aggregate data regarding gender identity, race, ethnicity and sexual orientation.
Based on comments, including criticism as discussed here, Nasdaq has modified the proposal in a variety of areas:
- Smaller boards. Companies with five or fewer directors would only need to include one diverse director, instead of two.
- Grace period for vacancies. A one-year grace period would be provided for companies that no longer meet the diversity objective as a result of a vacancy on the board.
- Timing of disclosure. Diversity information would need to be made publicly available before annual shareholder meetings, to align with disclosures for other proxy-related governance matters.
- Extra time for newly-listed companies. Newly-listed companies that become listed after the phase-in period for the new rules ends would have an additional two-year period after the phase-in period to fully meet the diversity objective.
- Trigger date. The operative date for disclosure would be the later of (1) one calendar year from the date of SEC approval of the revised proposal or (2) the date the proxy statement is filed for a company’s annual meeting during the calendar year of such SEC approval date.
- Location of disclosure. Companies could choose to disclose