The Nasdaq proposal would require firms to have extra variety on their boards
Nasdaq is pushing for more diversity among the more than 3,000 companies listed on its stock exchange.
Nasdaq filed a proposal with the Securities and Exchange Commission Tuesday urging regulators to introduce new listing rules for the composition of companies' boards of directors, as well as greater transparency about who occupies the boardroom seats.
According to the proposal, the majority of companies must have at least two different board members: a woman and a person who identifies as either an under-represented minority or LGBTQ. If a company cannot meet these requirements, it needs to explain why.
If the proposal is approved by the SEC, all companies would have to publicly disclose board-level diversity statistics within one year of the guideline being passed. Nasdaq said in a statement that the timeframe for companies to meet board requirements will vary depending on each company's listing level, but that all companies are expected to have at least one diverse director within two years of SEC approval .
"Our aim with this proposal is to provide a company listed on the Nasdaq with a transparent framework in which to effectively present their stakeholder composition and diversity philosophy to all stakeholders. We believe that this listing rule is a step on a broader path towards achieve inclusive representation across America. "Adena Friedman, President and CEO of Nasdaq, said in a statement.
According to a New York Times story quoting data from Nasdaq, more than 75% of the roughly 3,200 companies on the exchange currently do not meet the criteria
Nasdaq's push – the first exchange to call for diversity requirements – comes amid a boom in so-called ESG investments that assess a company's environmental, social, and governance factors. Companies take note of this given the record inflows into ESG funds. In January Goldman Sachs announced that companies without "at least one diverse board candidate" would not be listed on the stock exchange.
Nasdaq's proposal follows countless studies touting the benefits of greater diversity at board level and across all companies.
"Companies in the top quarter of gender diversity in leadership teams were 25 percent more likely to achieve above-average profitability than their peers in the fourth quarter," McKinsey said in a 2019 study Year 2014."