In June 2021, the New York Times reported a multiyear analysis of Fortune 100 and 500 companies that highlighted an old problem in big companies: underrepresentation of minorities and women still exists. Boardrooms are filled with old white men. Nasdaq Board Diversity Proposals is looking to tackle down these issues.

What are these proposals? How would they impact the way that Nasdaq’s investors take their decisions? Why does diversity matter for Nasdaq?

White Men Rule in Wall Street

Most large companies in the world are lead by men. For businesswomen, achieving leading positions has been historically hard. The phrase “Glass ceiling” has been used to describe the invisible barriers that women face. In 2015, the New York Times released the Glass Ceiling Index, inspired by Ernest & Young’s report that illustrates how big the problem is: there were more CEOs called “John” and “David” than women in the same position.

CEO of the International Corporate Governance Network Kerrie Waring pointed out in EY magazine Reporting that board quality depends on board diversity. Meanwhile, Blackrock Managing Director Michelle Edkins assured in 2018 that diverse teams make better decisions than homogenous ones. However, white men occupy most of the seats in boardrooms of large companies. 

In consequence, the lack of diversity is a problem that reduces the competitiveness of the companies.

Efforts for boosting diversity in corporate boards

In recent years, government and investing organizations have efforted to improve diversity in large companies’ boardrooms. In 2019, Goldman Sachs became the first Wall Street bank that declared that will not take companies public unless they have one “diverse” candidate on their board. Chief Executive David Solomon affirmed that companies with a woman on their board performances significantly better than others. 

One year later,  California lawmakers backed a mandate for racial diversity on corporate boards.

Despite the efforts, there are no significant changes in Wall Street. Women and minorities are still underrepresented. Nasdaq Board Diversity Proposals could help to change the landscape.

How could Nasdaq Board Diversity Proposals change the Fortune 500’s boardrooms?

Nasdaq Board Diversity Proposals dispose of several changes that affect all companies listed in the stock exchange. The new rules will have general applicability and will require companies to set diversity objectives.  

For small companies and foreign issuers, diversity requirements may meet diversity requirements with two female directors on the board.

Nasdaq-listed companies will count on a transition period to comply with diversity objectives. 

Chronology of Nasdaq Board Diversity Proposals

  • December 2020: Nasdaq Stock Market LLC (Nasdaq) filed two board diversity proposals for the Securities and Exchange Commission (SEC).
  • February 2021: SEC requested to modify the Proposals by amendments.
  •  August 6, 2021:  SEC approved the Board Diversity Proposal and Board Recruiting Service Proposal as amended without any further changes.

Nasdaq announced live webinars, available for replay, to explain companies in understanding and implementing the new rules.

Why do Nasdaq Board Diversity Proposals matter?

Diversity in large companies hasn’t improved in the latest years. The lack of diversity affects companies and reduces their competitiveness. Nasdaq Board Diversity Proposals is the first normative that will impact at a national and international level to boost diversity in boardrooms.

Read also: Diversity and inclusion are good for business: IADB

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