Companies listed on the Nasdaq stock exchange will soon have to meet diversity requirements or face being delisted. The newly proposed diversity requirements were announced this week and Nasdaq plans to ask the Securities and Exchange Commission for permission to institute them shortly.
The diversity requirements would mandate that each of the Nasdaq’s 3,249 companies have at least one female director and at least one director who identifies as an underrepresented minority or LGBTQ+. An “underrepresented minority” is defined by Nasdaq as “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 CEO Adena Friedman told DealBook, “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.” There are currently four companies listed that do not meet these requirements.
According to Friedman, more diverse boards are associated with higher-quality financial disclosures and fewer audit problems. Women, LGBTQ+ individuals, and minorities face higher barriers for entry to leadership positions, especially in the financial sector. This move by Nasdaq is a solution for leveling the playing field and encouraging more diverse voices to be heard in the corporate world.
