The Securities and Exchange Commission (SEC), as expected, has approved Nasdaq's recent proposal to remove the board diversity rule from its Listing Rules.
As we previously reported, the Nasdaq board diversity rule was recently struck down by the U.S. Court of Appeals for the Fifth Circuit, which found that the SEC exceeded its statutory authority under the Securities Exchange Act of 1934, as amended, in adopting the rule. The rule required Nasdaq-listed companies to disclose certain diversity information regarding their directors and to have a set number of diverse directors on their board by certain dates or explain why they do not.
In its order, the SEC agreed to waive the normally required 30-day operative delay to allow the proposed rule change to become effective on February 4 so that Nasdaq can meet the effective date of the Fifth Circuit's order.
While Nasdaq-listed companies will no longer be required to include the specific diversity disclosure previously prescribed by the rules, we expect (and have observed since the court's ruling) that many Nasdaq-listed companies (as well as New York Stock Exchange-listed companies) will continue to voluntarily provide diversity information in their proxy statements (in some form or another) to satisfy the expectations of their shareholders, particularly large institutional investors, as well as the proxy advisory firms.
