Results for: Nasdaq diversity
Nasdaq simplifies “confusing” timing requirements for board diversity rules
A new rule change designed to simplify the rules regarding the timing of compliance with the Nasdaq board diversity listing rules has been filed by Nasdaq and declared immediately effective. As you probably remember, on August 6, 2021, the SEC approved Nasdaq’s proposal for new listing rules regarding board diversity and disclosure, along with a proposal to provide free access to a board recruiting service. The listing rules adopted a “comply or explain” mandate for board diversity for most listed companies and required companies listed on Nasdaq’s U.S. exchange to publicly disclose “consistent, transparent diversity statistics” regarding the composition of their boards in a matrix format. (See this PubCo post.) Now, Nasdaq acknowledges that the formulation of the compliance deadlines, which were tied to the approval date of the proposal by the SEC, is “confusing and unnecessarily complicated.” Not Nasdaq’s fault though—it meant well! At the time of filing of the proposal, “Nasdaq and listed companies could not know when the proposal would be approved,” and Nasdaq “wanted to assure that listed companies had at least one year from the approval of the rules, or until their next annual meeting, to take necessary actions to satisfy the requirements” of the rules. Nasdaq is now making technical changes to several rules to address that problem by eliminating complicated references to the SEC approval date, and instead requiring compliance by December 31st of the applicable year (which, according to Nasdaq, is the fiscal year-end for approximately 80% of Nasdaq-listed companies subject to the rules).
Happy Holidays!
New challenge to Nasdaq board diversity rule
A new petition has been filed challenging the Nasdaq board diversity rule (see this PubCo post). The National Center for Public Policy Research filed the petition on Tuesday with the U.S. Court of Appeals for the Third Circuit, but asked the court to transfer the proceeding to the Fifth Circuit, where an earlier petition filed by the Alliance for Fair Board Recruitment is pending. (See this PubCo post.) The new Nasdaq listing rules, which were approved by the SEC on August 6, adopt 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.
Fifth Circuit hears oral argument on challenge to Nasdaq board diversity rules—will the rules survive?
On Friday, August 6, 2021, the SEC approved a Nasdaq proposal for new listing rules regarding board diversity and disclosure, accompanied by a proposal to provide free access to a board recruiting service. The new listing rules adopted a “comply or explain” mandate for board diversity for most listed companies and required companies listed on Nasdaq’s U.S. exchange to publicly disclose “consistent, transparent diversity statistics” regarding the composition of their boards. (See this PubCo post.) As anticipated, a court challenge to these rules didn’t take long to materialize. On Monday, August 9, the Alliance for Fair Board Recruitment filed a slim petition under Section 25(a) of the Exchange Act in the Fifth Circuit Court of Appeals—the Alliance has its principal place of business in Texas—for review of the SEC’s final order approving the Nasdaq rule. (See this PubCo post.) That petition was soon followed by a new petition challenging the rules filed by the National Center for Public Policy Research and subsequently transferred to the Fifth Circuit where the earlier filed petition was pending. (See this PubCo post.) Last week, a three-judge panel of the Fifth Circuit heard oral argument in the case, Alliance for Fair Board Recruitment, National Center for Public Policy Research v. SEC. Did it signal a result?
Nasdaq offers more answers on board diversity rule
As you probably know, on August 6, the SEC approved Nasdaq’s proposal for a new listing rule regarding board diversity and disclosure, along with a proposal to provide free access to a board recruiting service. The new listing rule adopts a “comply or explain” mandate for board diversity for most listed companies and requires companies listed on Nasdaq’s U.S. exchange to publicly disclose “consistent, transparent diversity statistics” regarding the composition of their boards in a matrix format. (See this PubCo post.) Shortly after SEC approval, Nasdaq posted a series of FAQs here. Nasdaq has been expanding the FAQs to provide some additional useful answers, as summarized below.
SEC approves Nasdaq “comply-or-explain” proposal for board diversity
You probably remember that, late last year, Nasdaq filed with the SEC a proposal for new listing rules regarding board diversity and disclosure, accompanied by a proposal to provide free access to a board recruiting service. The new listing rules would adopt 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. In March, after Nasdaq amended its proposal, and in June, the Division of Trading and Markets, pursuant to delegated authority, took actions that had the effect of postponing a decision on the proposal—until now. On Friday afternoon, the SEC approved the two proposals.
A little more on the Nasdaq Board Diversity Rule
On Friday, the SEC approved Nasdaq’s proposal for new listing rules regarding board diversity and disclosure, along with a proposal to provide free access to a board recruiting service. The new listing rules adopt 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 in a matrix format. (See this PubCo post.) Nasdaq has now posted a three-page summary of its new board diversity rule, What Nasdaq-listed Companies Should Know.
Petition filed for review of SEC approval of Nasdaq board diversity rule
It should hardly come as a surprise to anyone that the new Nasdaq board diversity rule (see this PubCo post) would be challenged in the courts. The rule was approved by the SEC on Friday, August 6. On Monday, August 9, the Alliance for Fair Board Recruitment filed a slim petition under Section 25(a) of the Exchange Act in the Fifth Circuit Court of Appeals—the Alliance has its principal place of business in Texas—for review of the SEC’s final order approving the Nasdaq rule. The petition itself is not particularly revealing, but it’s notable that the petitioner is also the most recent plaintiff challenging California’s two board diversity laws.
What’s happening with the Nasdaq board diversity proposal?
You probably remember that, late last year, Nasdaq filed with the SEC a proposal for new listing rules regarding board diversity and disclosure. The new listing rules would adopt 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. The proposal received a substantial number of comments, many of which were favorable and some of which were highly critical. For those of you who expected a speedy approval of this proposal by the SEC, you may need to reset your expectations.
Diversity for foreign private issuers
Countries outside the U.S. have sometimes been trendsetters when it comes to board diversity. For example, according to the California’s board gender diversity bill, SB 826, signed into law in 2018, “in 2003, Norway was the first country to legislate a mandatory 40 percent quota for female representation on corporate boards.” Under Nasdaq’s board diversity rules (see this PubCo post), board diversity encompasses more than gender diversity—it also includes persons who self-identify as underrepresented minorities or LGBTQ+. Nasdaq’s new diversity rules also apply to foreign private issuers. What does “board diversity” mean for foreign private issuers and non-US companies considering US IPOs? Does it focus solely on women or does it have a broader scope? Who are “underrepresented individuals in home country jurisdiction”? These questions and more are addressed in this fascinating piece, Board Diversity for Foreign Private Issuers: Does Board Diversity Mean the Same Thing Worldwide?, from Cooley’s Singapore office, posted on the Cooley CapitalXchange blog.
Nasdaq proposes a “comply or explain” board diversity mandate
Yesterday, Nasdaq announced that it has filed with the SEC a proposal for new listing rules regarding board diversity and disclosure. If approved, it would likely be a game changer. The new listing rules would adopt 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. The announcement indicates that the goal is to “provide stakeholders with a better understanding of the company’s current board composition and enhance investor confidence that all listed companies are considering diversity in the context of selecting directors, either by including at least two diverse directors on their boards or by explaining their rationale for not meeting that objective.” In its 271-page filing, Nasdaq explains its rationale by presenting an analysis of over two dozen studies that “found an association between diverse boards and better financial performance and corporate governance.” According to Nasdaq’s President and CEO, Adena Friedman, “Nasdaq’s purpose is to champion inclusive growth and prosperity to power stronger economies….Our goal with this proposal is to provide a transparent framework for Nasdaq-listed companies to present their board composition and diversity philosophy effectively to all stakeholders; we believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”
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