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Diversification in the workspace involves the inclusion of people of a different race, religion, physical ability, gender, ethnicity, age, sexual orientation and other demographics. Before proposing a diverse and disclosure rule, Nasdaq conducted an internal study based on the diversification of Nasdaq-listed issuers. The study showed an encouraging interdependence between a diverse board and improved company financial performance and institutional management. 

Besides, comment letters received by the US stock exchange market reported the proposal would positively impact the listed companies in several meaningful ways. For instance, the board would represent the client’s core values, promote investor’s confidence and encourage transparency through diversity disclosure. Additionally, diversity will also facilitate decision-making by improving the quality of information by providing reliable and comparable diversity metrics to the investor.

Given that we are all human, we often share the same interests irrespective of how diverse we are. For example, we usually shop for the same items, eat the same food, follow the same career paths and even play the same exciting games on top-rated iGaming sites such as Vulkan Vegas casino.  So, inclusion should be part and parcel of our daily lives to curb any forms of discrimination. It’s therefore high time that company stakeholders recognize how diverse their customer base is. And what better way is there to acknowledge that than being part of the topmost organizational structure?

Numbers Don’t Lie

A report from a study carried out by Deloitte in collaboration with Alliance of Board Diversity indicated that 82.5% of the board of directors in the Fortune 500 companies are white. Similarly, the number of women and minority representation at the Fortune 500 has continued to rise from 34% in 2018 to 38.3% in 2020, and white women’s representation increase by 20.6% in 2020. On the other side of the coin, 2020 saw a 1.5% drop of black male board members from 2018. 

In a report published by ISS Corporate Solutions between July 2020 and May 2021 S&P 500, nearly 32% of the newly appointed board of directors were black. In addition, a study done by Equilar notes that at least 18% of the board of directors are from the underrepresented minority.

Policy Change to Encourage Diversity

In August 2021, the U.S. Securities and Exchange Commission (SEC) agreed to proposed Nasdaq Stock Market LLC policy changes based on diversity and disclosure by Nasdaq-listed entities. 

The entities are required to appoint two diverse members to their company boards or explain why they do not meet the required standard. The listed companies should give one of the board positions to a person who identifies as a woman and the other position to a person who identifies as transgender, gay, lesbian, queer or is part of the underrepresented minority. 

On top of that, listed companies have been instructed to make public statistics on the demographic breakdown such as LGBTQ + status, self-identified gender, and racial identification. After approval of Nasdaq’s proposal, SEC required all companies listed on Nasdaq to have at least one board member within two years. 

The deadline for issuers to comply with the set rules will depend on how the company is listed on Nasdaq. Nasdaq Global Select Market and Nasdaq Global Market should comply within four years, while Nasdaq Capital Market should comply within five years of SEC’s diversity proposal approval. Newly listed companies on Nasdaq Global Select Market or the Nasdaq Global Market are expected to have a minimum of one diverse board member in one year after their listing date or proxy date. Companies newly listed on the Nasdaq Capital Market should have at least two diverse board members by the second year of listing on the exchange. 

New Rules for Foreign Companies As Well

For foreign entities, the rules are slightly different with a mandatory representation of a person who identifies as female, LGBTQ+, or a person who is part of the underrepresented minority such as racial, national, linguistic, religious uniqueness. As such, Nasdaq companies with smaller boards of five or fewer board of directors will only be required to have one diverse member. Again, it should either be a female or a person from the underrepresented minority or one that identifies as LGBTQ+. 

However, members of the advisory board and retired directors will not include the list of diverse board members. Companies that have not complied with the rules should explain why but will not be delisted from the exchange. Also, Nasdaq, through its partnerships with Equilar, Athena Alliance, and the Boardlist, will provide Nasdaq-listed issuers with free board recruiting services that are not mandatory to assist in picking the diverse board members. 

A Big Step Towards a More Diverse Future

Many listed companies have appointed more women and unrepresented minorities to their boards, and with the Nasdaq proposal approved, we expect companies will include more members of the diverse community. 

While the proposal is a step toward creating diversity and disclosure in the listed companies, they should also consider people with disabilities and veterans. Given that all the diverse individuals are part of our community, it only makes sense that they are also given opportunities to be part of the top-brass of Nasdaq-listed companies.