SEC Approves Nasdaq Board Diversity Listing Rules

On August 7, 2021, the SEC approved Nasdaq’s board diversity listing rules. The rules require Nasdaq-listed companies to have or explain why they do not have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. Companies are also required to annually disclose statistical information on board diversity using a standardized board diversity matrix. To assist companies in identifying diverse directors, the SEC also approved rules that provide Nasdaq-listed companies with free access to a variety of board recruiting services. The rules apply to most Nasdaq-listed companies, including smaller reporting companies, and, according to SEC Chair Gary Gensler’s statement, “reflect calls from investors for greater transparency about the people who lead public companies.”

Nasdaq posted updated guidance on how the new listing rules’ disclosure requirements will work and the timeline for its implementation.  The rules require compliance on a two-step deferred basis that provides different timeframes based on the company’s listing tier:

• Companies listed on The Nasdaq Global Select Market and The Nasdaq Global Market will need to have, or explain why they do not have, one diverse director by the later of two years of the SEC’s approval date (August 7, 2023), and two diverse directors within four years (August 6, 2025), or the date the company files its proxy statement for its annual meeting in that year. For most companies with a calendar year-end, the rules require compliance by the date on which the company files its proxy statement for its annual meeting in 2024 and 2026.
• Companies listed on The Nasdaq Capital Market will need to have, or explain why they do not have, one diverse director by the later of two years from the SEC’s approval date (August 7, 2023), and two diverse directors within five years (August 6, 2026), or the date the company files its proxy statement for its annual meeting in that year. For most companies with a calendar year-end listed on The Nasdaq Capital Market, the rules require compliance by the date on which the company files its proxy statement for its annual meeting in 2024 and 2027.
• Companies with boards of five or less directors, regardless of listing tier, will need to have, or explain why they do not have, one diverse director by the later of two years from the SEC’s approval date (August 7, 2023) or the date the company files its proxy statement for its annual meeting in that year.
• Smaller reporting companies can meet the diversity objective with two female directors, or with one female director and one director who is an underrepresented minority or LGBTQ+. 

Nasdaq’s matrix will apply to proxy statements for annual meetings of calendar year-end companies starting in 2022.

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