Whether the proposal offers a carrot or stick, I suppose, is in the eye of the beholder.
New York State Comptroller Thomas DiNapoli gave it a thumbs up, as did New York City Comptroller Scott Stringer, both of whom oversee investing for sizable public employee pension funds. So did some company execs, state and federal elected representatives, and everyday folks, too.
Others were unpersuaded. Conservative groups such as Judicial Watch, The Heritage Foundation and the Free Enterprise Project saw regulatory overreach and potential civil rights violations. Individual investors also registered opposition.
Their comments all are posted on the U.S. Securities and Exchange Commission website in response to a proposed change in listing rules for companies trading stock on the Nasdaq market that would require greater diversity among directors on their boards.
(The Nasdaq is one of two dominant markets for trading securities in the U.S.; many tech firms list there. The other, the New York Stock Exchange, has some of the country’s oldest publicly traded firms.)
The proposal would require that most Nasdaq-listed companies have at least two “diverse” directors, including one woman and one from traditionally underrepresented racial and ethnic minorities and/or the LGBTQ community.
Compliance dates would vary, but the new rule would apply to all firms within five years. Companies that don’t comply have to explain why, and non-compliance could lead to de-listing.
Along with the new rule, though, Nasdaq also proposes to lend a hand by offering a year’s complimentary access to recruiting services from Equilar, a California company that helps firms find and vet candidates for board and executive posts. The help has a retail value of about $10,000, according to Nasdaq.
“[W]e believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America,” Nasdaq CEO Adena Friedman said when the proposal was unveiled last month.
Groups have pushed for years to diversify the boards that help advise publicly held companies, to remake their too “male, pale and stale” image.
Boards also recognize the benefit of new faces, according to the 2020 annual corporate directors survey conducted by financial advisory firm PricewaterhouseCoopers. The survey found 94 percent of directors say diversity brings unique perspectives to the boardroom, 85 percent agree it improves relations with investors, and 72 percent see it as enhancing company performance.
As of this week, comments submitted to the SEC on the proposal topped 165. SEC approval is needed for the change to become effective.
Earlier this month, Nasdaq’s owner, The Nasdaq Stock Market LLC, asked for more time – to March 11 – to respond to the comments before the SEC takes action.
Nasdaq was not surprised by the volume of comments, according to a representative, but suggested the new listing rule was being misconstrued by some as a mandate or quota. Instead, she stressed, it was “aspirational.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected]
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