The U.S. Securities and Exchange Commission approves Nasdaq’s proposal to diversify its board of directors

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Nasdaq company update

The U.S. Securities and Exchange Commission approved the U.S. Stock Exchange unprecedented proposal.

The US Securities and Exchange Commission signed the Nasdaq’s proposed listing rules on Friday, which will require companies to disclose consistent board diversity statistics and have two diverse directors-including one identified as a female and one Identified as an underrepresented minority or lesbian, gay, bisexual, transgender, or queer.

If the company does not meet the quota, they will have to explain why. Companies need to release information on board diversity starting next year, and the rules for diversified directors will be implemented for 2-5 years from now, depending on the size of the board.

Nasdaq said that companies with five or fewer board members only need one diversified board member. Foreign companies will also gain some flexibility.

“[Nasdaq’s] The board of directors’ diversity proposal will provide investors with information to facilitate their evaluation of companies that may invest in,” the US Securities and Exchange Commission said.

As the board members of the new diversified company surged, the US Securities and Exchange Commission expressed support for Nasdaq’s request. Headhunting firm Heidrick & Struggles said that in 2020, the number of new black directors will increase to 28% of the board seats of Fortune 500 companies, almost three times the 10% of new directors appointed in 2019.

According to data from ISS Corporate Solutions, a provider of corporate governance affairs data, 33% of NASDAQ groups with six or more board directors currently have no representatives from diverse or minority ethnic groups. ISS stated that 8% of companies listed on the Nasdaq have no gender, race or ethnic diversity.

Nasdaq’s proposal has also received support from asset management companies and some companies. “We encourage the SEC to approve this proposal,” private equity firm Apollo Global Management wrote in a letter to the agency on June 3. Jay Clayton, former chairman of the US Securities and Exchange Commission, is a member of the Apollo board of directors.

But Republican senators once called on the US Securities and Exchange Commission to reject Nasdaq’s proposal. “All the risks associated with the Nasdaq proposal could cause some private companies to avoid going public at all,” Senator Pat Tumi, Republican of Pennsylvania, and 11 other conservatives wrote to the agency in February. Said in the letter. “The Nasdaq seems to be driven by inappropriate desires that affect social policy.”

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