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NASDAQ’s board diversity policy cleared

On Behalf of | Aug 26, 2021 | Firm News |

The Securities and Exchange Commission approved Nasdaq’s push for mixed corporate boards in early August of 2020. The first of its kind policy would require all corporations that list shares on one of the world’s largest market exchanges to feature boards that meet gender and race targets. The companies must hit these target numbers or explain in writing why they failed to do so.

The goals here in the U.S. are:

  • One woman director
  • Another board member who self-identifies as a racial minority or LGBTQ

The policy change also requires companies to release diversity statistics about the boards. As of 2020, only 25% of the companies listed on the exchange would have met these goals.

Providing more clarity to investors

Companies traditionally would strive to keep board members names out of the public spotlight, but this market-led initiative will change that:

“These rules will allow investors to gain a better understanding of Nasdaq-listed companies’ approach to board diversity, while ensuring that those companies have the flexibility to make decisions that best serve their shareholders,” SEC Chair Gary Gensler said in a statement.

Not everyone is happy about it

Some conservative politicians have come out against the new rule as overreaching and advancing a political agenda. Goldman Sachs and other companies have come out to support this initiative and Gensler for approving it.

It is best to prepare for the future

In the past, we’ve written about the pay gap experienced by women and minorities, and how to diversify companies and make them more inclusive at all levels. When applied, the benefits of a diverse workforce at all levels help companies grow and attract top-tier talent.

Publicly traded companies with questions on what this ruling means and how to address it can speak with an employment law firm. These legal professionals can help them to sensibly, effectively and legally implement any necessary changes.