SEC approves Nasdaq's plan to require board diversity

ARLINGTON, Va. – The Securities and Exchange Commission connected Friday approved Nasdaq's groundbreaking connection to boost the fig of women, radical minorities and LGBTQ radical connected U.S. firm boards.

The caller argumentation — the archetypal of its benignant for a U.S. securities speech — requires astir of the astir 3,000 companies listed connected Nasdaq to person astatine slightest 1 pistillate connected their committee of directors, on with 1 idiosyncratic from a radical number oregon who identifies arsenic gay, lesbian, bisexual, transgender oregon queer. It besides requires companies to publically disclose statistic connected the demographic creation of their boards.

“These rules volition let investors to summation a amended knowing of Nasdaq-listed companies’ attack to committee diversity, portion ensuring that those companies person the flexibility to marque decisions that champion service their shareholders,” SEC Chair Gary Gensler said successful a connection accompanying the decision.

Nasdaq-listed companies with 5 oregon less committee members, however, volition lone beryllium required person 1 divers member. The banal speech loosened the request for smaller boards aft considering feedback from investors, plus managers, lawmakers and advocacy groups astir whether its connection went excessively far, oregon didn't spell acold enough.

Ad

Companies that don't conscionable the diverseness criteria volition not beryllium delisted but indispensable publically explicate wherefore they could not comply.

Nasdaq’s deadline for companies to see divers directors differs depending connected however the companies are listed connected the exchange, but each corporations indispensable person astatine slightest 1 committee subordinate wrong a year.

“We are pleased that the SEC has approved Nasdaq’s connection to heighten committee diverseness disclosures and promote the instauration of much divers boards done a market-led solution,” Nasdaq said. The speech is partnering with Equilar, an enactment that advocates for much divers boards, to assistance companies enlistee committee candidates.

U.S. companies person accelerated efforts to name much women and radical minorities to their boards, responding to unit from investors and elected officials. Nasdaq's request carries important value due to the fact that of its quality to acceptable rules for its listed companies.

Ad

While the fig of women directors has accrued importantly successful caller years, studies suggest that companies were slower to bring much radical minorities to boards until the May 2020 constabulary sidesplitting of George Floyd acceptable disconnected nationwide protests and a nationalist reckoning connected racism.

An overwhelming 82.5% of directors among Fortune 500 institution boards were achromatic arsenic of June 2020, according to a survey from the Alliance of Board Diversity and the consulting steadfast Deloitte. The fig of radical minorities connected Fortune 500 boards roseate conscionable 1% betwixt 2018 and June 2020. However, the fig of women roseate 4 percent points implicit 2 years to 26.5%.

More recently, determination has been a surge of appointments of Black committee directors. Between July 2020 and May 2021, immoderate 32% of recently appointed committee members successful the S&P 500 were Black, up from 11% the erstwhile year, according to an investigation by ISS Corporate Solutions.

Ad

According to an Equilar study, 18% of committee members crossed Russell 1000 companies are radical minorities.

Some blimpish groups and Republican lawmakers strenuously opposed the proposal, arguing the requirements were arbitrary and burdensome. Republicans connected the Senate Banking Committee wrote a missive urging the SEC to cull the plan, saying “America’s firm boardrooms are not the spot for societal engineering.”

But Lorraine Hariton, CEO of the women's workplace advocacy radical Catalyst, said Nasdaq's program was a tenable effect to a tendency from the consumers, investors and galore institution leaders for greater transparency connected firm diversity.

“It is progressive but it is not retired of line," Hariton said. “They are not saying you person to bash this to beryllium listed. They are saying you person to explicate this.”

Copyright 2021 The Associated Press. All rights reserved. This worldly whitethorn not beryllium published, broadcast, rewritten oregon redistributed without permission.