US SEC Approves Nasdaq's Rules to Boost Board Diversity

​Fazzaco learned that the US Securities and Exchange Commission (SEC) has approved new Nasdaq​ rules that will require listed companies to meet race and gender targets. 

According to the new rules of Nasdaq, listed companies will have to have at least one female director in addition to another board member who self-identifies as a member of a racial minority or the LGBTQ community. Companies that do not meet these targets will be required to explain in a public disclosure why they have failed to do so.

The rules also require firms to release diversity statistics about their boards, after Nasdaq found in a 2020 study that more than 75 percent of its listed companies wouldn't have met the new requirements.

"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." said SEC Chair Gary Gensler in a statement. 

"We are pleased that the SEC has approved Nasdaq's proposal to enhance board diversity disclosures and encourage the creation of more diverse boards through a market-led solution," Nasdaq said. "We look forward to working with our companies to implement this new listing rule and set a new standard for corporate governance."

However, Sen. Pat Toomey, the top Republican on the committee panned the SEC's decision. "Corporate board rooms, like all organizations, can benefit from a diversity of perspectives, but NASDAQ's one-size-fits-all quota misses the mark," he said in an emailed statement. "By defining diversity by race, gender, and sexual orientation, NASDAQ's mandate will inevitably pressure companies to subordinate crucial factors such as knowledge, experience, and expertise when selecting board members."