New York, August 6 - The U.S. Securities and Exchange Commission approved a proposal from the trading company Nasdaq Inc that requires his listed companies to have varied boards or explain why they do not.
The proposal requires that companies have two of the directors, including one who defines as female and another as an underrepresented minority or LGBTQ or why they do not. Many companies have to publicly disclose the diversity of their Board.
These rules will allow investors to gain a better understanding of Nasdaq-listed companies' approach to board diversity, said Gary Gensler in a prepared statement.
Nasdaq said it is looking forward to working with our companies to implement this new listing rule and set a new standard for corporate governance.
Women and Minorities have been underrepresented in the top ranks of company, leading to a recent reckoning on racial and gender diversity in Corporate America. According to Equilar data, Boards in the Russell 3000 are halfway to gender parity. In the Russell 1000, 18.4% of directors are minorities underrepresented in the system.
Investor efforts to scrutinize diversity on boards have also been stymied by a lack of disclosure, with many companies not detailed about gender and race or ethnicity of directors.
Republican legislators and some companies criticized Nasdaq's proposal and urged the SEC to reject it, saying it would interfere with boards' responsibilities to shareholders and could impose new costs on companies.
Advocates for people with disabilities had pushed both Nasdaq and the SEC to include disability in the proposal, but were rejected, said Ted Kennedy Jr., chairman of the American Association of People With Disabilities in an interview with Reuters.
Nasdaq said in a comment letter that companies could consider and disclose additional diverse attributes such as disability or veteran status. But those attributes would not meet the requirements for a person who identifies as an under-represented minority or LGBTQII or a female or person that is black.
California and Illinois have laws on diversity boards for companies headquartered in their states.