News Analysis

Nasdaq’s diversity rule faces a conservative backlash

by Stephen Conmy on Sep 15, 2022

Nasdaq – an online global marketplace for buying and trading securities – is facing backlash from conservative right-wing groups in America, and it has to do with diversity quotas.

Tell me more

In 2021, Nasdaq said that all Nasdaq-listed companies must publicly disclose the diversity of its board of directors each year.

Nasdaq’s new ‘rules’ say listed companies must either have at least two diverse directors by 2025 or 2026 depending on their listing tier, including one who identifies as female and one who identifies as an underrepresented minority or LGBTQ+. If they don’t they have to explain why.

So this is about diversity quotas on boards?

In a nutshell, yes. Nasdaq, which is a private company, wants to ‘encourage’ companies to have more diversity on their boards.

Isn’t that a good thing?

Some believe so, and others don’t. Most people would agree that boards should be diverse in terms of the people who sit on them to better represent the markets they sell into.

All-male boards with a bunch of wealthy guys over 50 typically lead to group think, which is not good. So many believe diversity is the answer. 

Who is suing Nasdaq?

The Nasdaq rule is being challenged by the National Center for Public Policy Research and the Alliance for Fair Board Recruitment, a group founded by conservative legal activist Edward Blum.

The plaintiffs argue that it violates the equal protection clause of the Fifth Amendment by encouraging racial and sexist discrimination. Furthermore, they say it violates the First Amendment by forcing companies without diverse boards to engage in “self-condemnation.”

As a private company, Nasdaq is exempt from those arguments, according to the SEC.

What is the likely outcome?

Who knows? It’s one to keep an eye on. There has been a backlash in America against ESG and what conservatives called ‘woke capitalism’. 

What is certain is that boardroom diversity is now an issue that has been caught up in America’s ongoing, polarising culture war.

Diploma in ESG

As a leader in ESG, you need to anticipate investors’ questions before they are asked, manage the associated risks and implement an appropriate ESG framework.

Learn more

Governance matters

Free leadership insights weekly 


Related Posts