Advocates for diversity, equity, and inclusion policies suffered another setback this month with five policies.th The U.S. Circuit Court of Appeals rules that the Nasdaq Stock Exchange requires nearly 3,000 publicly traded companies to have at least one woman, one minority, and one LGBTQ director on their boards, or explain why it won't do so. He refrained from asking for it. The Nasdaq rules approved by the SEC also required companies to annually disclose how board members identify these categories. Board members of Nasdaq-listed companies are now free to decide whether to continue complying with Nasdaq's diversity rules.
“It is not unethical for a company to refuse to disclose information about the race, gender, or LGTBQ+ characteristics of its board members,” the court said in its decision to repeal Nasdaq's diversity rules, as reported by the Associated Press. I put it down. We are unaware of any established rules or customs in securities trading that require companies to explain why their boards of directors are not as diverse in race, gender, and sexual orientation as Nasdaq would like. ”
Nasdaq has decided to respect the court's ruling and said it will not seek further review.
Corporate board members now have new opportunities to define their and their companies' positions on diversity, equity, and inclusion.
For companies that already comply with Nasdaq's diversity rules, it is not illegal for them to continue that practice. You can continue to choose diverse members to join your board of directors. You can also continue to disclose information about your choices if you believe it is the right thing to do. However, company executives and boards will need to make a decision to announce whether and why they will rescind Nasdaq's diversity policy. At the very least, it will be necessary to announce this within the company. The board must openly discuss the pros and cons of its decisions and make the best decision for the organization.
Companies that have never followed Nasdaq's diversity policies can continue operating as usual. However, this ruling provides a new opportunity for corporate boards to evaluate their current policies regarding the addition of board members. Companies may also ask shareholders whether having a diverse board is important to their company and address such circumstances as they see fit.
Finally, for companies still on the fence about having diverse boards, this ruling provides another opportunity to choose sides. Whether a board decides to adopt Nasdaq rules or agrees to its own policy for electing diverse members to serve on the board, the board may decide that board diversity is not actually important. You can also.
No matter what situation a board finds itself in, it will undoubtedly be watched by shareholders and corporate observers, and boards should be prepared to deal with the implications of their decisions on this issue.
