Nasdaq wants its boards to be more diverse

Nasdaq is waiting for the SEC to make a call regarding the exchange's diversity proposal submitted in December 2020. Here's the low down.

Gretchen Kennedy

Gretchen grew up in a small Connecticut town where she learned to read The Wall Street Journal as part of the grade six enrichment program. She moved to Australia in 2002, earned a Master of Arts (Professional Writing) and went on to spend eight years writing on Wall Street. In June 2018, Gretchen returned to Australia and has since developed a keen interest in all things ASX. In December 2020, she started writing for the Motley Fool. Gretchen's usually writing something, reading a book or chasing her dogs around.

Published March 12, 2021 6:38 pm AEDT

Nasdaq Inc (NASDAQ: NDAQ) is waiting to hear from the Securities and Exchange Commission (SEC) regarding its board diversity proposal.

A request was submitted in December 2020 regarding the board diversity policy that Nasdaq can set for the businesses trading on its exchange.

The Wall Street Journal reports that Nasdaq will have to wait until August (at the latest) for the SEC's ruling regarding its request.

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Why does Nasdaq want more board diversity?

According to the WSJ, Nasdaq wants more women, racial minorities and LGBT individuals on its boards. If a company's board cannot meet the requirements, Nasdaq wants public disclosure of why it cannot.

The exchange has set board targets that include at least one woman and a director that identifies as a racial minority or lesbian, gay, transgender, bisexual or queer.

Following a recent audit of its boards, Nasdaq discovered that more than three-quarters of its listed companies do not meet its envisioned diversity metrics. This resulted in pursuing the SEC to update the exchange's rules.

Why is the SEC dragging its feet?

Last month, 12 Republican members of the US Senate Banking Committee wrote a letter to the SEC expressing concerns over the Nasdaq proposal.

The SEC claims that it has delayed the process due to the complexity of the request. By deciding to "institute proceedings", the SEC automatically receives a 90-day extension for the outcome. This can be further extended by another 60 days, which is what takes us to August 2021.

If the SEC accepts the proposal, all Nasdaq listed companies will have to disclose board diversity statistics within twelve months.

Foolish Takeaway

Variety is the spice of life. Many businesses are already considering how diverse the group is and why it's important to have an assortment of professionals steering the ship. This comes as part of the general corporate and social responsibly (CSR) movement.

Nasdaq has taken a significant position with its SEC request. We'll be waiting to hear about the outcome and what it will mean for the market.

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