SEC approves Nasdaq’s new diversity requirements for public company boards
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August 06, 2021
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Executive Summary
Nasdaq is pushing ahead with its board-diversity rules after the SEC gave its blessing Friday.
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Excerpt from the article originally published in Fortune

The Fortune article, "SEC approves Nasdaq’s new diversity requirements for public company boards," quoted Russell Reynolds Associates Consultant Rusty O'Kelley​ on how this new requirement will impact the broader diversity conversation in the boardroom. The article is excerpted below.

Nasdaq is one step closer to ushering in a new era of corporate board diversity and transparency following a landmark decision from U.S. financial regulators. 

For eight months, the New York exchange operator has been seeking the Securities and Exchange Commission’s sign-off on a plan to require many of its listed companies to have at least one or two “diverse” board members, or explain in writing why they do not. Nasdaq has also been pushing to be able to require its issuers to disclose the diversity breakdown of their boards. 

And after some tweaks were made about who must comply, how, and when, Nasdaq finally got its wish Friday when the SEC approved the proposals. 

... 

Under the proposal’s structure, the majority of Nasdaq-listed issuers that are based in the U.S. will need to have at least one woman on the board and another who self-identifies as Black, Hispanic, Asian, Native American, LGBTQ+, or as part of another underrepresented minority, by certain deadlines over the coming years. If the companies do not meet those benchmarks, though, Nasdaq is not threatening to delist their stocks. The exchange instead wants the company to explain in writing why that is, which could amplify public and investor pressure on the company to diversify. Nasdaq is even offering to cover the cost of board recruiting services for some of its listed companies. 

Issuers will also need to begin disclosing the statistical diversity breakdown of their boards’ structures by next year under the rule, a requirement that some have already fulfilled. LPL Financial, for instance, disclosed earlier this year that its board included six men, one of whom identifies as Black or African American, and three women, all of whom are white. Stamps.com said in an April proxy statement that it had four men on its board and one woman, while another director’s gender was not disclosed. Of the four men, one of Stamps.com’s directors identifies as Asian. 

The ruling marks a historic moment for advocates and investors who have been pushing for more women, people of color, and members of the LGBTQ+ community to have a seat in corporate America’s higher ranks, something that Nasdaq has continually touted as being paramount to better financial returns and risk controls. As Rusty O’Kelley III, who is a co-leader of board and CEO advisory partners at executive search firm Russell Reynolds Associates, told Fortune, the rules will “spur discussions in the nominating committees of every Nasdaq listed company about gender and ethnic diversity, which will ultimately lead to conversations about board composition, skills, experiences, and whether they have an inclusive culture.” 

Access the full article here.