When stock market indexing giant NASDAQ announced plans to make the companies listed on its exchange include at least some measure of diversity on their boards last December, the reaction was loud and immediate from both sides. Right-leaning groups like The Heritage Foundation declared the move “discriminatory and immoral” and part of some outrageous “social justice” experiment while some diversity advocates said the efforts didn’t go far enough. And now, it looks like the naysayers may have won; in a letter published on Feb. 28 in The Wall Street Journal, NASDAQ President Adena T. Friedman revealed that the organization was easing back on their original requirements.
As originally submitted for approval to the U.S. Securities and Exchange Commission (SEC), NASDAQ’s original diversity requirement proposed that all boards on the exchange’s roster include “at least two board members from diverse backgrounds.” These diverse backgrounds could include either gender identity, race, ethnicity or sexual orientation, but companies didn’t need to include representation from all these groups. They just needed two individuals total on their boards that met those requirements, e.g., two women or two Latinx individuals or two Black men would be fine — no need for a fuller or more equal representation across all diverse groups.
Notably, there was no penalty for not meeting this proposed requirement. If a company couldn’t do it, they simply had to “provide an explanation to shareholders” as to why they couldn’t meet that “required” goal.
