Call for biz-board diversity

If Nasdaq has its way, the companies listed on its stock exchange will no longer have overwhelmingly white or all-male boardrooms.

The New York-based exchange on Tuesday asked the Securities and Exchange Commission for permission to require listed companies to have at least two diverse directors or explain why they can’t meet that requirement.

The proposed rule would force boards to have at least one member who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBT. Nasdaq would also require its more than 3,300 companies to publicly disclose consistent and transparent diversity statistics about their board of directors within one year of the SEC’s potential approval of the rule.

The goal is to provide stakeholders “a better understanding” of each company’s board composition and “enhance investor confidence” that all listed companies are considering diversity in their boards, according to a news release.

“This proposal and partnership gives companies an opportunity to make progress toward increasing representation of women, underrepresented minorities and the LGBTQ+ community on their boards,” Nasdaq President Nelson Griggs said in a statement. “Corporate diversity, at all levels, opens up a clear path to innovation and growth. We are inspired by the support from our issuers and the financial community with this effort and look forward to working together with companies of all sizes to create stronger and more inclusive boards.”

Nasdaq, which is dominated by technology companies, is the first major exchange to seek a board diversity requirement.

The rule would shake up America’s overwhelmingly white and male corporate boards. White men have two-thirds of Fortune 500 board seats, while women hold only 22% of them, according to the 2018 Board Diversity Census from the Alliance for Board Diversity and the consulting firm Deloitte.

The survey also found that Black people make up less than 9% of board seats, compared with nearly 8% in 2010.

Companies that fail to meet Nasdaq’s requirement could avoid being delisted if they provide a public explanation of their reasons. Foreign and smaller companies would also have some flexibility in meeting the proposed requirements.

Anthony Romero, executive director of the American Civil Liberties Union, praised Nasdaq’s efforts to boost board diversity.

“Incremental change and window dressing isn’t going to cut it anymore as consumers, stakeholders and the government increasingly hold corporate America’s feet to the fire,” he said in a statement. “Nasdaq’s efforts to prod and push its listed companies is a welcomed and necessary first step. With increased representation of people of color, women and LGBTQ people on corporate boards, corporations will have to take actionable steps to ensure underrepresented communities have a seat at the table.”