On Tuesday, Nasdaq filed a proposal to the Securities and Exchange Commission requiring more diversity in the boardrooms of companies listed on the stock exchange.
If approved, these companies would be required to publicly disclose their diversity statistics among their board of directors. They also would need to have a minimum of two diverse board of director members and, if they don’t, would need to explain why. Nasdaq considers diverse members to include women, members of the LGBTQ+ community and people of color.
As it stands now, more than 75 percent of the approximately 3,200 companies listed on the exchange do not meet the criteria of this new proposal, according to the New York Times. Upon approval, Nasdaq says the timeframe for companies to comply with these new board requirements will depend on the given company’s listing tier, but it expects all the companies to have at least one diverse director within two years of the SEC’s approval.
It’s no secret that corporate boardrooms are overwhelmingly white and male. According to the Alliance for Board Diversity’s census from 2018, less than a quarter of boardroom seats at Fortune 500 companies were held by women. Black members held just 9 percent of seats.
Nasdaq is the first major stock exchange to make this kind of proposal. However, many other companies have also stepped up recently in an effort to change this stark reality.
For instance, Ceresa, a leadership training platform that aims to increase corporate representation of women, has started its ninth month of virtual training. Over the summer, Reddit founder Alexis Ohanian stepped down from the company’s board of directors and requested his seat be filled by a Black candidate (it was). Also, Gaingels, an NYC-based community network and investing syndicate that also places members of its own network of LGBTQ+ investors in C-suite and board member positions at the growth stage companies, had its most successful year this year.
Meanwhile, Nasdaq is the second-largest stock exchange in the world, so a move like this will have some pretty major implications, should it go through.
“Our goal with this proposal is to provide a transparent framework for Nasdaq-listed companies to present their board composition and diversity philosophy effectively to all stakeholders,” Nasdaq CEO Adena Friedman said in a statement. Friedman was appointed CEO in 2016 and is the first woman to lead a major U.S. stock exchange. “We believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”
