The Securities and Exchange Commission has approved Nasdaq’s proposal to increase diversity in boardrooms of companies listed on the exchange. Under the new guidelines, most listed companies would be required to have one or more female director, as well as a director from an “underrepresented” minority group, namely anyone who is Black, Latino, or LGBTQ+. If the company does not meet that minimum threshold, it must explain in writing why not.
“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 chairman Gary Gensler said in a statement.
The rules are consistent with the requirements of the Exchange Act, reflecting calls from investors for greater transparency about the people who lead public companies. In his statement, Gensler also noted that he believes “our markets work best when investors have access to such information.”
The proposal received opposition from Republican Commissioner Hester Pierce, who voted against the motion. The other GOP commissioner, Elad Roisman, offered a partial dissent.
“The Proposal furthers the growing trend by private and public institutions of classifying people by gender, racial, ethnic, and LGBTQ+ categories. Such classifications strip people of their individuality, their ability to focus on what makes them uniquely valuable to society, their freedom to think and speak for themselves, and their right to decide when and with whom to share their personal attributes,” said Pierce.
The Nasdaq first proposed new guidelines to increase diversity in boardrooms last December, but amended that effort to make it easier for small companies to meet the standard. By reducing the number of diverse board members to a minimum of two, smaller companies not listed on the Fortune 500 have more flexibility. 