Companies listed on Nasdaq will have to publicly disclose the diversity of their boards and eventually have at least two diverse directors, under a proposal submitted to the Securities and Exchange Commission Tuesday.
If the SEC approves the proposal, companies would have one year to comply with the exchange's disclosure requirement and to have at least one diverse director. Additionally, all companies would be required to have a female director and one from an underrepresented minority within five years, with final deadlines dependent on each company's Nasdaq listing tier. Those companies without two diverse directors would have explain why they did not meet the requirement.
Nasdaq cites more than two dozen studies connecting diverse boards with improved performance and corporate governance as reasons for the proposal.
The goal of the proposed listing requirements is to give investors more transparency into board composition, according to a statement from Nasdaq, "and enhance investor confidence that all listed companies are considering diversity" when selecting directors.
Nasdaq President and CEO Adena Friedman said in the statement that the proposed listing rule "is one step in a broader journey to achieve inclusive representation across corporate America."
Nasdaq is partnering with corporate leadership data provider Equilar to help companies reach the diversity goals.