Yesterday, Nasdaq filed a rule proposal with the SEC that would require all listed companies to disclose board diversity statistics, and would require most of them to either satisfy specified board diversity requirements or disclose why they don’t. This excerpt from Nasdaq’s press release summarizes the requirements of the proposed rule:
Under the proposal, all Nasdaq-listed companies will 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. The timeframe to meet the minimum board composition expectations set forth in the proposal will be based on a company’s listing tier. Specifically, all companies will be expected to have one diverse director within two years of the SEC’s approval of the listing rule.
Companies listed on the Nasdaq Global Select Market and Nasdaq Global Market will be expected to have two diverse directors within four years of the SEC’s approval of the listing rule. Companies listed on the Nasdaq Capital Market will be expected to have two diverse directors within five years of the SEC’s approval. For companies that are not in a position to meet the board composition objectives within the required timeframes, they will not be subject to delisting if they provide a public explanation of their reasons for not meeting the objectives.
Nasdaq has posted FAQs and a summary of what listed companies need to know about the rule proposal on its website. One of the things about the proposal that surprises me is how few listed companies currently satisfy the proposed diversity standard. According to a NYT DealBook report, Nasdaq says that more than 75% of listed companies do not meet the proposed standard.
That means that a lot of companies are going to have a lot of work to do if the rule is adopted. In order to assist those companies, Nasdaq also announced a partnership with Equilar to assist listed companies in addressing board composition issues.
-John Jenkins, TheCorporateCounsel.net December 2, 2020
