As you know, the Nasdaq board diversity disclosure requirements might be in jeopardy at the moment, as we await the decision of the en banc Fifth Circuit following oral argument in Alliance for Fair Board Recruitment and National Center for Public Policy Research v. SEC. As noted in this PubCo post, the discussion at oral argument seemed to be dominated by rule skeptics. Notwithstanding the possibility that the rules might be overturned—or perhaps because they might be—the folks at Bloomberg Law have used the opportunity to analyze some of the data from those disclosures, offering a glimpse into the current state of corporate board diversity among the over 4,000 Nasdaq-listed companies. What is the bottom line? The authors found that “companies have diversified their boards in part by predominantly hiring white women—meeting the rule’s gender-based requirements—but falling short when it comes to other demographics.”
Nasdaq diversity listing rules. The listing rules apply a “comply or explain” mandate for board diversity for most listed companies and require companies listed on Nasdaq’s U.S. exchange to publicly disclose “consistent, transparent diversity statistics” regarding the composition of their boards. More specifically, the Nasdaq board diversity rule sets a “recommended objective” for most Nasdaq-listed companies to have at least two diverse directors on their boards, “including (i) at least one Diverse director who self-identifies as Female; and (ii) at least one Diverse director who self-identifies as an Underrepresented Minority or LGBTQ+.” If they do not meet that objective, they would need to explain their rationales for not doing so. Companies with five or fewer directors may satisfy the recommended objective with one director from a diverse background rather than two. The rule also requires listed companies to provide annually, in a board diversity matrix format, statistical information regarding the company’s board of directors related to the directors’ self-identified gender, race and self-identification as LGBTQ+. A person is “diverse” under the rule who “self-identifies in one or more of the following categories: (i) Female, (ii) Underrepresented Minority or (iii) LGBTQ+.” These terms are all defined—and sub-defined—in the rules. For example, an “underrepresented minority” is defined as someone who is “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”; all of those terms are also defined. (See this PubCo post.) If a company elects disclosure in lieu of compliance with the diversity objectives, the company is required to identify the applicable requirements and explain the reasons why it did not satisfy them. Nasdaq said that it “would not evaluate the substance or merits of a company’s explanation.”
Analysis. In their analysis, the authors collected and examined the board diversity matrices contained in 2023 proxy statements for a sample of 314 Nasdaq-listed companies. The authors found that each of those 314 companies satisfied the first part of the equation—they had at least one female director on the board.
Companies did not fare as well in satisfying the second facet of the objective—at least one director who self-identifies as an Underrepresented Minority or LGBTQ+. There, the analysis found that 28% of companies had no minority directors. About 60% of the female directors were White, followed by about 15% Asian and 12% Black or African-American. Fewer than 10% of female directors identified as Hispanic or Latinx, around 5% identified as two or more races or ethnicities and around 1% or 2% identified as Native Hawaiian or Pacific Islander. No male or female directors in the dataset identified as LGBTQ+ or as Alaska Native or Native American.
Although this recent article does not address the percentages overall, a Bloomberg analysis of a small sample from late year showed that 29% of companies had no minority or LGBTQ+ directors, 44% had one minority or LGBTQ+ director, 17% had two and 10% had three or more minority or LGBTQ+ directors. Among the minority directors represented, about 50% identified as Asian, about 25% as Black or African-American, 15% as Hispanic or Latinx, slightly over 10% as two or more races or ethnicities, about 8% as LGBTQ+, and about 1% each as Native Hawaiian or Pacific Islander and Alaska Native or Native American.
