|Image by giggel, CC BY 3.0, Link|
The new non-binding rules Bloomberg Law first reported will encourage over 3,700 public companies listed on Nasdaq to elect one woman and one LGBTQI person or under-represented minority to their board of directors.
Nasdaq, with a collective market capitalization of over $19 trillion—only slightly less than the New York Stock Exchange (NYSE), with a total listed market cap of $25.5 trillion is a major player in the world economy.
Under the rules, which were first proposed in December 2020, each Nasdaq-listed company (subject to certain exemptions) will be required to have, or explain why it does not have, at least one director who self-identifies as female and one director who is either an “Underrepresented Minority” or is lesbian, gay, bisexual, transgender or queer (LGBTQ+).
“Underrepresented Minority” is defined as “an individual who self-identifies as one or more of the following: Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or Two or More Races or Ethnicities.”
If a company does not meet Nasdaq’s applicable standard for board diversity, it will be required to disclose its failure to achieve this standard and the reasons why it was not able to do so. This disclosure must be made in advance of the company’s next shareholder meeting in a proxy statement or on the company’s website. Nasdaq has stated that it will not substantively evaluate companies’ explanations of their failure to meet the standard.