Nasdaq Proposes New Listing Rules to Advance Board Diversity: Comply or Explain

On Dec. 1, 2020, Nasdaq filed a rule proposal with the U.S. Securities and Exchange Commission that would require listed companies to disclose board diversity statistics using Nasdaq’s Board Diversity Matrix. Nasdaq would require companies to provide this disclosure in proxy materials or on company websites within one year of the SEC’s approval of the rules. The rules also would require listed companies to have, or explain why their boards do not include, diverse directors as follows:

  • All listed companies would be expected to have one diverse director within two years of the SEC’s approval of the rule;
  • Companies listed on the Nasdaq Global Select Market and Nasdaq Global Market would be expected to have two diverse directors within four years of the SEC’s proposal of the rule;
  • One of the two diverse directors must self-identify as female; one of the two diverse directors must self-identify as either an underrepresented minority or LGBTQ+.

For companies that are not in a position to meet the board composition requirements within the required timeframes, they will not be delisted if they provide a public explanation of their reasons for not meeting the rules.

Nasdaq believes that more than 75% of listed companies do not meet the diversity standards contemplated by the proposed rules.

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