Board diversity continues to be a concerted area of focus for companies, investors, regulators and other stakeholders. Progress continues and the importance of board diversity is underscored by compelling findings on the positive impacts on corporate performance, business value, ability to attract and retain talent, and stakeholder engagement.
There are various rule-based approaches to increasing diversity on corporate boards. The NASDAQ rule takes a disclosure – rather than a mandate – approach in essentially requiring listed companies to disclose board diversity statistics and have, or disclose why they do not have, a minimum of two diverse board members. Transparency and disclosure continue to be common threads in ESG and board diversity.
Somewhat typical of nascent rules and regulations, the NASDAQ board diversity rule has been judicially challenged. I spoke with Andrew Ramonas of Bloomberg in anticipation of oral arguments in Alliance for Fair Board Recruitment v. SEC, scheduled for Monday before the Fifth Circuit.
Nasdaq’s softer path to board diversity may prove more palpable to a court, said Kristyn Noeth, a Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC of counsel, who advises companies on environmental, social and governance issues. “A disclosure rule is likely the best model going forward,” Noeth said.