NASDAQ proposal for increased corporate board diversity gains steam
The letter submitted by LCDA in support of a recent NASDAQ rule proposal to increase corporate board diversity will help create momentum.
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The Latino Corporate Directors Association (LCDA) has signed on to a recent proposal by NASDAQ to improve corporate board diversity.
In December 2020, the NASDAQ announced a proposed rule change — a9SR-NASDAQ-2020-081 — that would require at least one female and one person of color on most NASDA listed corporate boards within five years.
LCDA recently submitted a letter in support of this proposed rule.
"We believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”
"We support these rule changes because for too long SEC rules have permitted inadequate disclosure of directors' diversity backgrounds, despite investor demand for this kind of information," said Roel Campos, LCDA Chair and former Commissioner of the U.S. Securities and Exchange Commission (SEC). "This regulatory indifference has helped sustain the exclusion of American Latinos and other racial and ethnic minorities from boards and the C-suite, despite the existence of an adequate pipeline of qualified candidates. The gap between the labor force and executive representation is widest among Latinx than any other underrepresented group and it must end now."
“Nasdaq’s purpose is to champion inclusive growth and prosperity to power stronger economies,” said Adena Friedman, President and CEO, Nasdaq said at the time the rule was announced. “Our goal with this proposal is to provide a transparent framework for Nasdaq-listed companies to present their board composition and diversity philosophy effectively to all stakeholders; we believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”
The rule sets up a complex tier system by which each company must have at least one woman and one person of color; five years is the maximum time frume.
All Nasdaq-listed companies will also be required to publicly disclose board-level diversity statistics through Nasdaq’s proposed disclosure framework within one year of the SEC’s approval of the listing rule.
LCDA said these reporting requirements are also critical.
“LCDA also supports the new disclosure requirements in Nasdaq's diversity proposal. Current requirements make it difficult for investors to ascertain whether there are any Latinx board members. Investors need improved disclosures and transparency to gauge a company's commitment to the Latinx community and market. In addition, there is a fiduciary benefit to diverse C-Suites.” LCDA said in a press release.
LCDA also referred to a 2020 report from McKinsey, which found “a positive, statistically significant correlation between company financial outperformance and [board] diversity, on the dimensions of both gender and ethnicity."
"The Latinx community is the fastest growing labor and consumer force in the United States, yet severely underrepresented among Fortune 500 and 1000 boards and often forgotten when assessing director diversity."
Notably, the report further found that companies with significant gender diversity were 28% more likely to financially outperform their peers.
"The Latinx community is the fastest growing labor and consumer force in the United States, yet severely underrepresented among Fortune 500 and 1000 boards and often forgotten when assessing director diversity," Campos added. "Nasdaq's Proposal will assist significantly in ensuring that diversity statistics are transparently disclosed and in providing extremely important information to inform all investors in their decision making. Additionally, for those corporations that seek to improve the quality of their board diversity with Latinx representation, the Nasdaq Proposal will assist in that goal being accomplished. We urge the SEC to approve this proposal."
The proposal was submitted to the Securities and Exchange Commission on December 1, 2020.
The SEC, which regulates the NASDAQ and other exchanges, will examine the proposal for approval.
The NASDAQ is an exchange which has attracted many of the top technology companies like Apple, Microsoft, and Alphabet, the parent company of Google and YouTube, for trading.