The new rules require listed companies, beginning in 2022, to disclose each year specified board-level diversity data in a uniform format in their annual proxy or information statement or on their website. In addition, after a more extended phase-in period, companies must either meet the exchange’s board diversity “objectives” as set forth in the rules or, if they do not, explain why. The rules define diversity in terms of gender identity, race and ethnicity, and LGBTQ+ identity, as self-identified by board members. Listed foreign issuers may elect to comply with alternative requirements modified to accommodate their different diversity considerations and restrictions under home country law.
Nasdaq underscores that the new rules enact a “disclosure-based framework” for board diversity, rather than establish a mandate that boards achieve particular diversity levels. Accordingly, under Nasdaq’s “comply-or-explain” governance approach, a company explaining why it does not meet the applicable diversity objective will not face delisting or other Nasdaq sanctions.
Nasdaq’s proposal, in the form it was most recently amended and approved by the SEC, is available here. The SEC’s order approving the rule changes can be read here.
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Authored by Alan Dye (co-editor), Richard Parrino (co-editor), Kevin Greenslade, Brian O'Fahey, and Lillian Tsu
