The announcement from Wall Street’s top regulator marks the conclusion of a monthslong debate at the SEC on whether to approve or reject Nasdaq’s proposed changes.
“These rules will allow investors to gain a better understanding of Nasdaq-listed companies’ approach to board diversity, while ensuring that those companies have the flexibility to make decisions that best serve their shareholders,” SEC Chairman Gary Gensler said in a statement accompanying the formal order.
“These rules reflect calls from investors for greater transparency about the people who lead public companies, and a broad cross-section of commenters supported the proposed board diversity disclosure rule,” he added.
The first-of-its-kind proposal requires companies listed on the Nasdaq to meet certain minimum targets for gender and racial diversity of their boards or explain in writing why they have failed to do so.
The Nasdaq’s goal for most U.S. companies is to have at least one woman director in addition to another board member who self-identifies as a member of a racial minority or the LGBTQ community. The exchange operator applauded the SEC’s order in a press release shortly after the announcement.
“We are pleased that the SEC has approved Nasdaq’s proposal to enhance board diversity disclosures and encourage the creation of more diverse boards through a market-led solution,” Nasdaq said. “We look forward to working with our companies to implement this new listing rule and set a new standard for corporate governance.”