Nasdaq: Companies with all-white male boards could be delisted under new proposals
- Nasdaq has said that companies listed on its main US stock exchange should have two "diverse directors" on the board.
- If they don't, they could be delisted, it said, as first reported by The New York Times DealBook.
- Under a proposal to be reviewed by the Securities and Exchange Commission, companies must have at least one woman director and one director who self-identifies as an underrepresented minority or LGBTQ+.
- Currently, three in four companies listed on Nasdaq's stock exchange don't meet these requirements.
- Companies that do not meet the requirements will not be delisted if they publicly explain themselves, Nasdaq said.
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Companies listed on Nasdaq's US stock exchange will have to have at least one woman and another "diverse" director on their board under new proposals.
If companies don't meet the diversity requirements, they could be delisted.
The 3,249 companies listed on Nasdaq's main US stock exchange will have to have at least one female director and one director who self-identifies as an under-represented minority or LGBTQ+, The New York Times DealBook first reported Tuesday.
If they don't, they will have to publicly explain why they have not met the requirement, or face being delisted, Nasdaq said in a press release.
Currently, three in four companies listed on Nasdaq don't meet these diversity requirements.
"An 'underrepresented minority' is an individual who self-identifies in one or more of the following groups: 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," Nasdaq said.
"It's not like we're saying this is an optimal composition of a board, but it's a minimum level of diversity that we think every board should have," Nasdaq CEO Adena Friedman told DealBook.
Nasdaq will ask the Securities and Exchange Commission (SEC) for permission for the change on Tuesday. It will likely be weeks before the SEC reaches a verdict.
Under Nasdaq's proposals, companies are expected to have at least one of the two "diverse directors" within two years, while the biggest companies will need one of each type of director within four years.
The companies will also have to report data on their board's diversity within a year of SEC approval.
Benefits of a diverse board range from higher-quality financial disclosures to fewer audit problems, Friedman said.
It follows large companies pushing for greater boardroom diversity.
Since July, Goldman Sachs has stopped doing IPOs for companies without at least one "diverse" board member, with a focus on women.
"We might miss some business," Goldman Sachs CEO David Solomon told CNBC in January after announcing the change. "But in the long run, this I think is the best advice for companies that want to drive premium returns for their shareholders."
BlackRock is also trying to build a pipeline of female and Black leaders.
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