As
previously reported, Nasdaq has submitted a request to the SEC to approve a board diversity requirement for listed companies. Following submission, the SEC is soliciting public comments for a 60 day period on the proposal.
A review of the comments so far finds that financial professionals, stakeholder advocates, and government or elected officials have indicated broad support for the proposal, including favorable comments from CalPERS, State Street, and Goldman Sachs. Commenters have highlighted improved performance from diverse boards, as well as the importance of diversity disclosures.
In an act of transparency,
Nasdaq filed a letter summarizing comments it has received regarding potential concerns or requested modifications, including:
- Allow additional time for companies listed on all tiers (Nasdaq Global Select, Nasdaq Global Market, and Nasdaq Capital Market) to comply with the diversity objectives.
- Provide a “cure” period for a listed company that falls out of compliance due to an unanticipated departure of a diverse director.
- Allow greater flexibility for companies with relatively small boards.
- The proposed rules could cause listed companies to feel compelled to ask current, non-diverse directors to resign from their boards.
Not all comments have been supportive. Several comments from private investors have expressed concern that the proposed rules are targeted toward political motivations rather than improved returns or corporate governance.
The current even party split on the Commission makes it unlikely the proposal will move forward immediately, but once President-elect Biden’s SEC Chair nominee is confirmed, the Center expects the proposal to receive approval. Listed companies will have two years from approval to have one diverse director and four years from approval to have two diverse directors to include one female and one underrepresented minority director.
