On 6 August, the U.S. Securities and Exchange Commission (SEC) made a public statement on Nasdaq’s diversity proposal. SEC approved Nasdaq Stock Market LLC’s proposed rule changes related to board diversity and disclosure. The new listing standards will require each Nasdaq-listed company, subject to certain exceptions, to have at least two diverse board members or explain why it does not. The new listing standards also will require disclosure, in an aggregated form, of information on the voluntary self-identified gender, racial characteristics, and LGBTQ+ status of the company’s board. The proposal represents a step forward for investors on board diversity.
As noted in the past, investors are increasingly demanding diverse boards and diversity-related information about public companies. Nasdaq’s proposal improves the quality of information available to investors for making investment and voting decisions by providing consistent and comparable diversity metrics.
Nevertheless, there is more work to be done in improving both diversity and transparency at public companies and in the capital markets more broadly. For example, disability may be a relevant characteristic, as well as diversity among senior management and the workforce more broadly. There is a continued, harmful disparity in the representation of a wide range of communities in the capital markets. Because enhanced diversity is critically important for investors, the markets, and the economy, this could be a starting point for initiatives related to diversity, not the finish line.
