Tag: NASDAQ

What role should the exchanges play in encouraging board diversity?

Board diversity and how (and whether) to try to achieve it is a topic that has certainly appeared on a lot of corporate governance agendas in the last few years.  Institutional investors have applied pressure on corporations, shareholders have submitted precatory proposals for shareholder votes, investment banks have insisted on diverse boards as preconditions for taking companies public, and California and a number of other states have adopted legislation, whether it be a board diversity mandate, a soft target or simply a disclosure requirement.  Most recently, Nasdaq filed with the SEC a proposal for new listing rules regarding board diversity and disclosure, adopting a comply-or-explain approach. 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.”​ Interestingly, however, the NYSE has not followed suit.  In fact, in an interview on Bloomberg TV in December, NYSE President Stacey Cunningham said, when asked about the Nasdaq proposal, that it was not something that they were considering adopting at the NYSE: “When we use exchange listing standards to require things like diversity profiles or others, we’re defining the investable universe…. We just don’t think we should be using our listing standards because that forces our views on investors and prevents them from being able to make the choices that they want to make and that they are making.” In contrast to the SEC, whose remit is largely disclosure, the exchanges regularly impose corporate governance requirements.  Should board diversity be one of them?

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.

Senators urge the SEC to take action

Democrats and Republicans are busy “lobbying” the SEC these days. Republicans want the SEC to nix Nasdaq’s proposal for new listing rules regarding board diversity and disclosure. Democrats want the SEC to beef up its insider trading rules in connection with Rule 10b5-1 plans. Will either find a receptive audience?

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.”​

Nasdaq to propose new tier for thinly traded securities

It’s well recognized that the equity markets work pretty well for companies that trade in high volumes, but companies with low trading volumes? Not so much. Thinly traded securities often face liquidity challenges, including wider spreads, higher transaction costs, fewer market makers and potential difficulties for investors that seek to unwind their positions. These issues can discourage small- and medium-sized enterprises from  accessing the public markets, a problem that the SEC has been anxious to address. To find potential solutions for these problems, in October 2019, the SEC solicited proposals for changes in equity market structure designed to improve the secondary trading markets for thinly traded securities. Nasdaq has just announced that it has submitted to the SEC an application for exemptive relief that would facilitate its proposal “to establish a tier nestled [sounds very cozy!] within the U.S. public equity markets that is better tailored and far more hospitable to thinly-traded securities than is the all-purpose, undifferentiated market environment in which they suffer today.”

Time to catch up on recent proposals at the Exchanges

Time to catch up on some of the recent proposals at the Exchanges.

Nasdaq proposes to modify the requirement for shareholder approval of issuances involving 20% or more of the shares or voting power outstanding

Nasdaq is proposing to modify the listing requirements in Rule 5635(d) to (i) change the definition of market value for purposes of the shareholder approval rule and (ii) eliminate the requirement for shareholder approval of issuances at a price less than book value but greater than market value. 

NASDAQ—oops, I mean Nasdaq—acknowledges reality

Last week, Nasdaq filed with the SEC a proposed rule change that finally recognized the reality that compliance with the “all-caps” presentation of “NASDAQ,” as in “The NASDAQ Stock Market LLC,” has been inconsistent at best and negligible at worst.

SEC approves Nasdaq proposal for golden leash disclosure

by Cydney Posner As discussed in this PubCo post and this PubCo post, in March, Nasdaq resubmitted to the SEC a proposal requiring listed companies to disclose third-party compensation of directors in connection with their candidacy for or service on company boards.  These “golden leash” arrangements are most common in connection […]

Nasdaq resubmits proposal for disclosure of “golden leash” arrangements

by Cydney Posner On March 15, Nasdaq resubmitted its “golden leash” disclosure proposal to the SEC. As discussed in this Pubco post, the proposal, which originally was rejected on technical grounds, relates to third-party compensation of directors in connection with their candidacy for or service on company boards.  These “golden leash” […]