Statement by Commissioners Lee and Crenshaw on Nasdaq’s Diversity Proposals

Allison Herren Lee and Caroline Crenshaw are Commissioners at the U.S. Securities and Exchange Commission. This post is based on their recent public statement. The views expressed in the post are those of Commissioner Lee and Commissioner Crenshaw, and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [August 6, 2021], the Commission approved Nasdaq Stock Market LLC’s proposed rule changes related to board diversity and disclosure. [1] The new listing standards will require each Nasdaq-listed company, subject to certain exceptions, to have at least two diverse board members or explain why it does not. [2] The new listing standards also will require disclosure, in an aggregated form, of information on the voluntary self-identified gender, racial characteristics, and LGBTQ+ status of the company’s board. [3] We support the proposal because it represents a step forward for investors on board diversity.

As we have noted in the past, investors are increasingly demanding diverse boards and diversity-related information about public companies. [4] Nasdaq’s proposal should improve the quality of information available to investors for making investment and voting decisions by providing consistent and comparable diversity metrics. [5]

Nevertheless, there is more work to be done in improving both diversity and transparency at public companies and in our capital markets more broadly. For example, disability may be a relevant characteristic, as well as diversity among senior management and the workforce more broadly. There is a continued, harmful disparity in the representation of a wide range of communities in our capital markets. Because enhanced diversity is critically important for investors, the markets, and our economy, we hope this is a starting point for initiatives related to diversity, not the finish line.

Endnotes

1See Securities Exchange Act Release No. 34-92590 (August 6, 2021) (order approving SR-NASDAQ-2020-081 and SR-NASDAQ-2020-082) (“Order”).(go back)

2See id.(go back)

3Nasdaq also will offer a complimentary board recruiting service for certain eligible Nasdaq-listed companies. See id.(go back)

4See Commissioner Allison Herren Lee, Diversity Matters, Disclosure Works, and the SEC Can Do More: Remarks at the Council of Institutional Investors Fall 2020 Conference (September 22, 2020); Commissioner Caroline Crenshaw, Statement on the “Modernization” of Regulation S-K Items 101, 103, and 105 (August 26, 2020).(go back)

5See Order at 25 (“The Commission finds that the Board Diversity Proposal would provide widely available, consistent, and comparable information that would contribute to investors’ investment and voting decisions.”).(go back)

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