February 23, 2021 8 minutes to read · 1800 words

Nasdaq Proposes New Rule Requiring Listed Companies to Diversify Their Board

By John Mark Zeberkiewicz and Ryan A. Salem

Reprinted with permission from Business Law Today, January 2021. ©2021 by the American Bar Association. All rights reserved. This information or any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Recent events have spurred a social justice movement that has called for companies to commit to inclusion and diversity, specifically in the composition of their boards of directors.*  In light of the foregoing, on December 1, 2020, Nasdaq filed a proposal with the U.S. Securities and Exchange Commission (“SEC”) that, if approved by the SEC, would condition a company’s continued listing on Nasdaq’s U.S. exchange on the satisfaction of certain board diversity and disclosure requirements.  In proposing this rule, Nasdaq conducted its own internal study on the diversity of Nasdaq-listed companies, including a review of more than two dozen third-party studies on the effects of board diversity.  Nasdaq concluded that a positive correlation exists between diverse boards and improved corporate governance and financial performance.

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