The SEC Approves Nasdaq Diversity Rule for Corporate Boards

TRUNORTH Client Alerts

By Patrick A. Bradford

The Securities and Exchange Commission recently approved a proposal by the Nasdaq to diversify corporate boards. The Nasdaq’s proposed rule is aspirational, requiring disclosure of compliance or an explanation of non-compliance. However, the proposal has drawn heated debate in both political and business circles, with some arguing for needed integration of corporate boards, and others arguing that the policy is racially discriminatory. The two Republican appointed Commissioners dissented from the SEC’s approval along these grounds.

View the SEC’s August 6, 2021 review of Nasdaq’s board diversity proposal here.

We previously noted that the proposed diversity rule, while admirable in concept, is internally inconsistent, disconcertingly pitting diverse groups against each another. The proposal suggests at least two “diverse” board members – – one a woman and the other a member of a racial minority, or LGBTQ affiliated. The proposal by its terms would permit the election of no African-Americans. Such a “diversity” result is both counterintuitive, and all too common an occurrence.

Our February 2021 editorial in Fortune magazine highlights our concerns: Nasdaq’s board diversity rule pits Black people against LGBTQ people | Fortune