Nasdaq Announces New Proposed Listing Requirements to Advance Diversity

On December 1, 2020, the Nasdaq Stock Market LLC filed a proposal with the U.S. Securities and Exchange Commission (“SEC”) to adopt new listing rules related to board diversity and disclosure.

If approved by the SEC, the new listing rules would require all companies listed on the Nasdaq exchange to publicly disclose “consistent, transparent diversity statistics regarding their board of directors.” Additionally, the new rules would require most Nasdaq-listed companies to have, or explain why they don’t have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. 

* Underrepresented minority means an individual who self-identifies as one or more of the following: Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or Two or More Races or Ethnicities.

**LGBTQ+ means an individual who self-identifies as any of the following: lesbian, gay, bisexual, transgender, or a member of the queer community.

Under the proposal, all Nasdaq-listed companies will be required to publicly disclose board-level diversity statistics through Nasdaq’s proposed disclosure framework within one year of the SEC’s approval of the listing rule. The timeframe to meet the minimum board composition expectations outlined in the proposal will be based on a company’s listing tier. All companies will be expected to have one diverse director within two years of the SEC’s approval of the listing rule. Companies listed on the Nasdaq Global Select Market and Nasdaq Global Market will be expected to have two diverse directors within four years of the SEC’s approval of the listing rule. Companies listed on the Nasdaq Capital Market will be expected to have two diverse directors within five years of the SEC’s approval.

Foreign companies and smaller reporting companies would have some flexibility in satisfying this requirement.

The proposal credited the past year’s social justice movement as a driving force for the Nasdaq Board of Director’s decision. It also cited an analysis of over two dozen studies that demonstrate that diverse boards are positively associated with improved corporate governance and financial performance.  

In the proposal, Nasdaq also cited its own experience. In 2002, Nasdaq Inc welcomed its first woman, Mary Jo White, who later served as SEC Chair, to its board of directors. Later, Ms. White was joined by a second woman. In 2019, Nasdaq welcomed its first Black director.

Nasdaq’s proposal, the first of its kind, comes as minority groups remain vastly underrepresented in corporate boardrooms.

A 2018 report by Deloitte and the Alliance for Board Diversity found that White board members held 83.9% of board seats on Fortune 500 companies. Black board members accounted for just 8.6%, Hispanic/Latino 3.8%, and Asian/Pacific Islanders just 3.7%.

In a review carried out over the past six months, Nasdaq found that more than three-quarters of its listed companies would have fallen short of the proposed requirements. Around 80% or 90% of companies had at least one female director, but only about a quarter had a second one who would meet the diversity requirements.

Many of the biggest companies listed on Nasdaq appear to already comply with the new criteria. Among those that don’t are Chinese internet companies Pinduoduo Inc., Inc., and Baidu Inc., which have no women on their boards. Others with all-male boards include solar company Array Technologies Inc., biotechnology company Allakos Inc. and National Beverage Corp., maker of LaCroix sparkling water.

Companies that fail to meet the requirements could be delisted, though Nasdaq executives say it is unlikely. Companies could satisfy the rule by providing a public explanation for their reasons for not meeting the objectives. Only firms that don’t make such disclosure could face delisting proceedings.

Some critics call Nasdaq’s proposal an overreach. But most executives have voiced their support for the move, pledging to meet the requirements. 

Like other proposed changes to exchange listing rules, Nasdaq’s proposal is subject to review by the SEC, which has already made diversity a greater emphasis, releasing its first diversity and inclusion strategic plan earlier this year.

Before the SEC makes a decision, it will undergo a public-comment process, meaning it will likely be months before the commission approves or rejects the plan. The ultimate decision would likely come under the incoming administration of President-elect Joe Biden, who will appoint a new chairman or chairwoman to lead the SEC.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855