Nasdaq proposes board diversity requirement for listed companies

Nasdaq proposes board diversity requirement for listed companies

© Reuters. FILE PHOTO: A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City © Reuters. FILE PHOTO: A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City

NEW YORK (Reuters) – Nasdaq Inc on Tuesday filed a proposal with the U.S. Securities and Exchange Commission that, if approved, will require all Nasdaq-listed companies to adopt new rules related to board diversity and disclosure or potentially face delisting.

The new rules will require most Nasdaq-listed companies to have, or publicly explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+.

All companies will be expected to have one diverse director within two years of the SEC's approval of the new rule.

"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," said Nasdaq Chief Executive Officer Adena Friedman.

"We believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America," she said.

Foreign companies and smaller companies would have additional flexibility in satisfying the diversity requirement with two female directors.

The exchange operator said that over two dozen studies found an association between diverse boards and better financial performance and corporate governance.

Companies that are not able to meet the board composition objectives within the required time-frames will not be subject to delisting if they provide a public explanation of their reasons for not meeting the objectives, Nasdaq said.

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