×
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

What Nasdaq's new proposal means for diversity in corporate America

Nasdaq's initiative is a new step towards correcting the racial and gender imbalance in corporate America
Last Updated 03 December 2020, 14:55 IST

Nasdaq is asking companies listed on its stock exchange to make their boardrooms more inclusive through a new proposal that may transform hiring processes in capitalist America.

The 3,300 companies listed on the Nasdaq will now have to make their senior leadership more diverse, as the stock exchange is seeking approval from the Securities and Exchange Commission (SEC) to ask companies for their hiring breakdowns. If approved, companies would be at risk of getting delisted if they refuse to disclose this information.

As per the proposal, all companies listed on the Nasdaq will have to share with the exchange the breakdowns of their boards by race, gender and sexual orientation. It will also require companies to have or justify why they do not have, at least one female board member and one member who identifies as a member of the LGBTQ community.

This initiative from Nasdaq is a new step that works towards correcting the racial and gender imbalance in corporate America. This is the first such step taken on such a large scale by an exchange to address inequalities within companies, which mostly have male and white members in leadership.

This move comes in the same year that major corporates across the US have pledged to provide more support to minorities through funds and diversified hiring processes. Such steps appear to have been accelerated after the numerous Black Lives Matter protests that happened across the US following the killing of George Floyd on May 25 in Minneapolis.

Many companies have rehashed their commitments to addressing racial inequalities in hiring at all levels. Microsoft pledged to double the number of Black employees in senior and leadership positions at the company by 2025. Facebook and Starbucks also set a deadline of five years to increase diversity within its ranks. Adidas, AT&T, Intel and many other players also committed funds to the cause.

Nasdaq Chief Executive Adena Friedman called on the New York Stock Exchange to enact similar rules.

The tech-heavy Nasdaq quoted research that found that companies with at least two diverse board members had nearly 12% more earnings growth per year than an average company that was not as inclusive.

Women have only 23.1% of board seats in companies listed on the Russel 3000, an index that has most of the American stocks. That number stood at 15% in 2016, according to research by Equilar.

While the SEC has not yet responded to the latest proposal, it had pushed for a greater focus on diversity earlier this year when Chairman Jay Clayton called for improved inclusion and opportunity in the financial sector.

The US Chamber of Commerce has come out in support of Nasdaq’s decision, with Executive Vice President Tom Quaadman calling it a "business-led solution to resolving diversity issues on corporate boards".

ADVERTISEMENT
(Published 03 December 2020, 14:21 IST)

Follow us on

ADVERTISEMENT
ADVERTISEMENT