Nasdaq Proposes New Diversity Rule Requiring Nasdaq-Listed Companies to Diversify Their Boards or Risk Delisting
January 6, 2021
Recent events have spurred a social justice movement that has called for companies to commit to inclusion and diversity, specifically in the composition of their boards of directors.* In light of the foregoing, on December 1, 2020, Nasdaq filed a proposal with the U.S. Securities and Exchange Commission (“SEC”) that, if approved by the SEC, would condition a company’s continued listing on Nasdaq’s U.S. exchange on the satisfaction of certain board diversity and disclosure requirements. In proposing this rule, Nasdaq conducted its own internal study on the diversity of Nasdaq-listed companies, including a review of more than two dozen third-party studies on the effects of board diversity. Nasdaq concluded that a positive correlation exists between diverse boards and improved corporate governance and financial performance.