News: Companies investing in Nasdaq, maybe forced to add racially diverse directors

Diversity

Companies investing in Nasdaq, maybe forced to add racially diverse directors

Nasdaq Inc. stock exchange is opening slots for racially diverse directors. The new rule caters to counter lack of women directors and racial diversity, as per the analysis by ISS Corporate Solutions.
Companies investing in Nasdaq, maybe forced to add racially diverse directors

Nasdaq Inc. stock exchange has come up with a rule that mandates trading companies to disclose its talent pool on the basis of gender and racial ethnicity. The disclosure needs to be done within one year after the endorsement by the Securities & Exchange Commission. The rule further empowers the exchange to question the companies over the absence of female and racially diverse directors.

The companies with six directors or less than that are mandated to accommodate at least one diverse director.

An analysis was conducted by ISS Corporate Solutions with data of 2,284 participating companies. The analysis ruled out lack of racial diversity and less number of women directors. As per the statistics,

  • More than one third of the Nasdaq trading companies lacked racially diversity;
  • It also reported absence of female directors in more than one out of ten trading companies;
  • Approximately 8% of the companies had no women participation and racially diverse directors;
  • Out of 600 Nasdaq-listed companies (with less than 6 board members) 64% had no racially diverse pool while 44% lacked female presence as directors.

Speaking on the stats, Marija Kramer, head of ISS Corporate Solutions said, “The data shows clear evidence that there’s a small-cap company gap when it comes to diversity on U.S. boards. Listed companies, if they aren’t already, should think about how they’re going to recruit for more diverse directors".

He further pointed out the significance of disclosure rules in the absence of any federal law. It allows genuine disclosure of the diversity as opposed to voluntary disclosure which cannot be relied upon blindly. Moreover, diversity is seen to increase investments, thereby promoting voluntary disclosure of diversity.

Heidrick & Struggles, a recruiter, revealed that the majority of the large companies are answering to the increased pressure from the Board to appoint diverse directors. As per S&P 500, the addition and appointment of Black Directors had tripled in 2020.

Talking about the incorporation of diversity among directors, J. Veronica Biggins, a recruiter at Diversified Search Group and a member of the Southwest Airlines Co. board highlighted the growing demand for a diverse talent pool.

In California, public companies are required to appoint at least one diverse director by the end of this year. The Securities & Exchange Commission is planning on a set of recommendations for the companies to disclose diversity information.

Meesha Rosa, Vice President of Corporate Board Services at Catalyst, revealed that, a mix of regulatory, legal and private efforts will not just enhance diverse culture among the companies but will also better the financial performances of the companies.

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Topics: Diversity

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