Nasdaq Threatens 75% of Listed Companies With Order to Appoint Women & LGBT or Other 'Diverse' Directors to Board – or Else
US stock exchange Nasdaq has warned listed companies they must appoint at least two “diverse” directors to their board – a ‘self-identified’ female and an “underrepresented minority” or LGBTQ person – or possibly face delisting.
Nasdaq revealed its plan to turbocharge diversity on its exchange in a proposal filed with the Securities and Exchange Commission (SEC) on Tuesday.
Under the proposed new rules, not only will all listed US companies be required to “publicly disclose consistent, transparent diversity statistics regarding their board of directors,” but “most” companies would have to either appoint “diverse” board members or explain why they hadn’t done so in a letter.
The mandatory addition of “one [director] who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+” appears to leave room for Rachel Dolezal-style “self-identification” as something other than white, male, or straight – a potential loophole for companies that prefer to keep their current boards. Non-US companies and small firms would be permitted to appoint two female directors instead.
Listed companies would be required to publish their diversity stats within a year of the SEC adopting Nasdaq’s proposal, and be required to have “one diverse director” within two years of implementation. Depending on company size, they would have four or five years to comply with the two-director requirement. Those who fall short can escape delisting only “if they provide a public explanation of their reasons for not meeting the objectives.”
While the exchange’s reasoning behind the proposal – to “enhance investor confidence that all listed companies are considering diversity in the context of selecting directors” – has already raised some eyebrows, Nasdaq insisted it had analyzed “over two dozen studies that found an association between diverse boards and better financial performance and corporate governance.”
However, with 75 percent of currently-listed Nasdaq companies falling short of the proposed requirements, according to the New York Times’ financial blog DealBook, some have questioned how piling on new regulations is supposed to improve financial performance. While Nasdaq has hit record highs in recent days, much of the real economy is still in shambles from the Covid-19 economic shutdowns and in no shape to expend resources on the hunt for box-checking board candidates.
To enforce the new quota system, Nasdaq has partnered with Equilar, a “leading provider of corporate leadership data solutions.” As ZeroHedge pointed out, Equilar’s own board of directors appears to lack any ethnic diversity.
The proposal was widely panned, as social media users joked Nasdaq was “turning into [a] college admissions office” and argued that selecting directors based on their skin color, genitalia and sexual preference epitomized the bigotry most “diversity” measures claim to fight. “This delegitimizes women and POC,” one user tweeted, pointing out that “people will think they achieved their position by quota and not talent.”
Others merely wondered how Nasdaq planned to enforce such a rule.
Though some, inevitably, thought it didn’t go far enough, insisting companies wouldn’t benefit from diversity unless they had at least three women on their boards.
At the same time as Nasdaq was hopping aboard the woke express, investment bank Credit Suisse unveiled its “LGBT-350” index on Tuesday to widespread groans. Many wondered about the need for such an index.
The bank is by no means the only outfit obsessed with surface-level attributes – Goldman Sachs will no longer take a company public unless it has at least one “diverse” board member. Since September, the state of California has required companies headquartered there to have a minimum number of minority directors or face six-figure fines.
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