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| - Citing sluggish progress in appointing non-white directors, the Nasdaq announced Tuesday it was seeking US regulatory approval to enact diversity requirements on listed companies. The exchange filed a request with the Securities and Exchange Commission to require its 3,300 listed companies to have, or explain why they do not have, at least one female board member and one board member who identifies as either an under-represented minority or LGBTQ. The move comes amid a broader US reckoning on both gender and race in the wake of the #MeToo movement and mass protests on racial justice following the police killing of George Floyd. Like management in Corporate America, boards of directors remain overwhelmingly white and male. The 271-page proposal to the SEC emphasizes greater transparency of board diversity, pointing to lack of consistency that means "investors are not able to readily compare board diversity statistics across companies." The SEC initiative notes that companies can be delisted for failure to meet disclosure requirements, although that sanction can be appealed. Nasdaq Chief Executive Adena Friedman said she wanted to accelerate efforts on diversity in the United States, citing greater progress in other countries. "We are taking the leadership here because there has been so little action on this front, and we do think it's an important thing for us to do, to create a more inclusive capitalist society," Friedman said in an interview on CNBC. Friedman told CNBC that she believes the "vast majority" of Nasdaq's companies already have at least one female director but that the boards are far less representative in terms of other diversity. Friedman said she would "welcome" a decision by the rival New York Stock Exchange to enact equivalent requirements. The exchange cited academic research showing the benefits of board diversity to company performance. The NYSE did not comment directly on the Nasdaq proposal, but pointed to a council set up by the exchange to bolster diversity. The council is comprised of 20 CEOs from large companies, such as Merck, Delta Air Lines and Johnson & Johnson. "As a champion for board diversity, the NYSE has developed solutions alongside our listed companies to drive change in the boardroom, actively working to identify diverse candidates through the NYSE Board Advisory Council and supporting an increased focus on this important issue," a NYSE spokeswoman said. The Nasdaq proposal will be open for public comment for about 21 days, a Nasdaq spokesman said. The soonest it could be enacted would be 45 days after it is published. Outgoing SEC Chair Jay Clayton said the agency has an "unwavering" commitment to diversity and welcomes "dialogue on how to improve diversity, inclusion and opportunity in the financial services sector and our economy more broadly," according to an email from an agency spokeswoman. Among those praising the initiative were investment bank Goldman Sachs and the civil rights group NAACP. Some conservative commentators on Twitter criticized the measure. The proposal requires at least one board director who identifies as female and one or more who self-identifies as one of the following: "Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Hawaiian or Pacific Islander." The board member could also qualify if they are "LGBTQ+," which "means an individual who self-identifies as any of the following: lesbian, gay, bisexual, transgender or a member of the queer community." Among Fortune 500 companies, only about 34 percent of board members were women or minorities, according to 2018 study by Deloitte and the Alliance for Board Diversity. Nasdaq's filing cited a World Economic Forum study that rated the US 53rd in board gender diversity. The exchange said Nasdaq-listed companies are already subject to European Union requirements on board diversity in some countries. The proposal also points to academic research that shows "diverse boards are positively associated with improved corporate governance and financial performance." These include studies that show gender-diverse boards or audit committees are better about disclosing financial information and have lower likelihood of manipulated earnings or earnings fraud. Frank Dobbin, a sociologist at Harvard University, called the Nasdaq effort a "step in the right direction," but said changing the board has not been shown to have "trickle-down effects" on the organization compared with initiatives targeting management. "Top management team diversity does have trickle-down effects, helping to diversify lower levels of management," Dobbin told AFP in an email. "That's what companies, and stock market overseers, should be striving for." jmb/st
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