Nasdaq on December 1, 2020, filed a proposal with the U.S. Securities and Exchange Commission (the “SEC”) to adopt new listing rules that relate to diversity of board composition and disclosure of statistical information on board composition. Proposed Rule 5605(f) would require Nasdaq-listed companies other than investment companies (which are expressly carved out) to either (i) have at least one director who self-identifies as female and at least one director who self-identifies as an underrepresented minority or LGBTQ+, or (ii) explain why the company does not have at least two directors on its board that self-identify in such categories. Proposed Rule 5606 would require Nasdaq-listed companies to provide statistical information on the company’s board of directors and its members’ self-identified gender, race, and self-identification as LGBTQ+. The Nasdaq proposal includes a Board Diversity Matrix that companies could use to provide the statistical information called for by proposed Rule 5606.

In its proposal to the SEC, Nasdaq noted that with respect to gender diversity, U.S. company boards lag behind other jurisdictions that have imposed requirements related to board diversity. Moreover, based on its review of dozens of empirical studies, Nasdaq found that an extensive body of academic research demonstrates that diverse boards are positively associated with improved governance and financial results. 

Under the proposal, all Nasdaq-listed companies would be required to disclose board diversity statistics within one year of the SEC’s approval of the listing rule. Additionally, all Nasdaq-listed companies would be required to have at least one diverse director within two years of the SEC’s approval of the listing rule, and would be required to have at least two diverse directors within four or five years, depending on the company’s listing tier, of the SEC’s approval of the listing rule.