New Rules for Fairness

Diversity is coming to the boardroom not through government regulations but private initiative.

Global Finance | January 7, 2021

The Global Finance article, "New Rules for Fairness," quoted Russell Reynolds Associates Consultant Rusty O'Kelley on why the private sector is calling for more diversity on boards. The article is excerpted below.

On December 1, Nasdaq proposed new listing rules to the US Securities and Exchange Commission which would require all companies listed on its exchange to have at least two diverse board directors: one who is a woman and one who self-identifies as either a minority or LGBTQ+. Smaller and foreign companies could satisfy this rule with two female directors. Companies that don’t comply within the time frame would have to explain why, or risk being delisted from the exchange.

Calls for diversity are also coming from the private sector and from large investors such as BlackRock, Vanguard Group and State Street Global Advisors that hold companies for the long term. Investment banks like Goldman Sachs Group, meanwhile, will only underwrite IPOs for companies with at least one diverse director. “[Investors] want to make sure companies are well-governed by their boards and create value,” says Rusty O’Kelley III, co-leader of the Board & CEO Advisory Partners group at Russell Reynolds Associates.

Despite countless studies showing that diverse businesses perform better and are more sustainable, of the over 3,000 companies listed on the Nasdaq, only about 25% would meet the proposed requirements. Most companies have at least one female director, but approximately 75% don’t have a second director who meets the diversity requirement.

To read the full article, click here.

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New Rules for Fairness