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Nasdaq to Demand Board Diversity

Companies whose boards are entirely comprised of white men could be delisted from Nasdaq's US stock exchange under new proposals.

Companies listed on the Nasdaq stock exchange will soon have to meet diversity requirements or face being delisted. The diversity requirements would mandate that each of the Nasdaq’s 3,249 companies have at least one female director and at least one director who identifies as an underrepresented minority or LGBTQ+. An “underrepresented minority” is defined by Nasdaq as “an individual who self-identifies in one or more of the following groups: Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander or two or more races or ethnicities.”

The newly proposed diversity requirements were announced this week and Nasdaq will ask the Securities and Exchange Commission for permission to institute them shortly.

Nasdaq CEO Adena Friedman told The New York Times: “It’s not like we’re saying this is an optimal composition of a board, but it’s a minimum level of diversity that we think every board should have.”

This proposal is not going to be a giant leap forward for diversity as there are currently only four companies listed that do not meet these requirements. However, it's a valid statement of intent and good to know that Nasdaq wishes to make its opinion on the subject clear.

According to Friedman, more diverse boards are associated with higher-quality financial disclosures and fewer audit problems. Women, LGBTQ+ individuals, and minorities face higher barriers for entry to leadership positions, especially in the financial sector. This move by Nasdaq is a solution for an evening of the playing field and encouraging more diverse voices to be heard in the corporate world.

Other large companies have also pushed for greater boardroom diversity. In July, Goldman Sachs stopped doing initial public offerings for companies without at least one diverse board member, with a focus on women. "We might miss some business," Goldman Sachs CEO David Solomon told CNBC in January after announcing the change. "But in the long run, this I think is the best advice for companies that want to drive premium returns for their shareholders."

Source: Business Insider


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