Nasdaq seeking mandatory board diversity for its listed companies
Nasdaq is pushing for the more than 3,000 companies listed on its U. S. stock exchange to make their boardrooms less overwhelmingly male and white by hiring directors that better reflect the country’s diverse population.
The company filed a proposal Tuesday with the Securities and Exchange Commission that, if approved, would require all companies on the exchange to disclose the breakdowns of their boards by race, gender and sexual orientation.
Companies that do not comply could be delisted, or kicked off the exchange.
The proposal would also require most Nasdaq-listed companies to have at least two diverse directors or, if they cannot meet the mandate, to explain why not.
That could include one board member who is female and one who is either an underrepresented racial minority or LGBTQ.
Foreign companies and smaller companies would have additional flexibility in satisfying this requirement with two female directors.
Nasdaq’s plan ups the stakes in what was already a widening push by shareholders and governments around the world for more diversity on corporate boards, which often are composed of mostly white men.
It’s not just a sense of fairness.
Proponents say greater board diversity can improve financial performance for companies — and ultimately their stock prices — by bringing in varying opinions and voices and fostering a better understanding of employee and customer bases.
In its proposal, Nasdaq cited a report from the Carlyle Group investment company, which found that companies it invested in that have at least two diverse board members have nearly 12% more earnings growth per year than the average of companies that lack diversity.
Companies have heard the criticism and made some moves toward increased diversity, but progress has been slow.
Women hold just 23.1% of board seats at companies in the Russell 3000, a broad index that includes most of the U.S. stock market.
That’s up from about 15% in 2016, according to executived-ata firm Equilar.