Nasdaq’s New Board Diversity Rules: What’s the Impact?

As International Women’s Day and Black History month approach, some U.S. companies are being asked to show if they walk the talk. The Nasdaq Inc. stock exchange’s new diversity rules will impose board diversity disclosure requirements on Nasdaq-listed companies. While the impact of comply-or-explain diversity quotas is, at best, difficult to predict, these mandatory disclosure requirements may nudge companies to improve the diversity of their boards or risk facing investor pressure.

The diversity disclosure is mandatory but the quotas are “comply-or-explain” rules: Companies that don’t meet their quota must publicly explain why they fall short, but won’t otherwise be penalized. Nasdaq is not expected to review or assess companies’ explanations. And certain issuers are exempt from some or all rules.

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