The Securities and Exchange Commission has approved Nasdaq’s groundbreaking proposal to boost the number of women, racial minorities and LGBTQ people on U.S. corporate boards.
The Securities and Exchange Commission on Friday approved Nasdaq’s groundbreaking proposal to boost the number of women, racial minorities and LGBTQ people on U.S. corporate boards.
The new policy — the first of its kind for a U.S. securities exchange — requires most of the nearly 3,000 companies listed on Nasdaq to have at least one woman on their board of directors, along with one person from a racial minority or who identifies as gay, lesbian, bisexual, transgender or queer. It also requires companies to publicly disclose statistics on the demographic composition of their boards.
“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,” SEC Chair Gary Gensler said in a statement accompanying the decision.
Nasdaq-listed companies with five or fewer board members, however, will only be required have one diverse member. The stock exchange loosened the requirement for smaller boards after considering feedback from investors, asset managers, lawmakers and advocacy groups about whether its proposal went too far, or didn’t go far enough.
Companies that don’t meet the diversity criteria will not be delisted but must publicly explain why they could not comply.
Nasdaq’s deadline for companies to include diverse directors differs depending on how the companies are listed on the exchange, but all corporations must have at least one board member within a year.