The world’s second-largest stock exchange wants to mandate a minimum measure of board diversity among listed companies.
Diversity in corporate leadership is good for business — and the lack of diversity is a risk that investors ought to know about. That’s the impetus behind Nasdaq’s new proposal, unveiled last week, requiring that most companies listed on its main US stock exchange have, within a flexible timeline, at least one woman and one member of an underrepresented group — such as Black people, Latinos, or members of the LGBTQ+ community — on their board of directors. If they don’t meet the requirement, Nasdaq wants them to explain why.
Currently, 75 percent of the roughly 3,000 corporations listed on the exchange, the second-largest in the world, fail to meet both diversity requirements. It’s why the new listing rule, which the US Securities and Exchange Commission must approve, shouldn’t be so shocking. Nasdaq wants its trading companies to publicly disclose the diversity statistics of its board of directors using a board diversity matrix format created by the exchange, or else risk getting delisted.
Both of Nasdaq’s proposed listing requirements should be approved: They’re a sensible step in the right direction that aligns with investors’ goals of increasing profitability while advancing corporate equality and fairness.
Nasdaq already maintains an assortment of financial reporting requirements and corporate governance standards that all listed companies must abide by, such as holding an annual shareholder meeting, adopting and publishing a code of conduct, and disclosing publicly any compensation or payments by third parties to a company’s directors. Increased transparency leads to better-informed investors. “We rely on companies to make full and accurate disclosures to inform investors so that investors can make their own decisions as to which companies they want to invest in and what they expect of the companies where they’re an investor,” Adena Friedman, Nasdaq’s president and CEO, told CNBC about the proposal.
Nasdaq’s diversity push is not entirely unprecedented. Governor Gavin Newsom of California signed a corporate diversity law in September mandating public companies based in California include at least one person from an underrepresented community by the end of next year. It followed a law signed two years ago by then-Governor Jerry Brown requiring those corporations to have at least one woman on their board. And several European countries have enacted laws establishing quotas for women in boardrooms, including Norway (the first to do so, in 2003) and France; Germany has agreed to adopt a similar mandatory measure.
Still, many stock market observers and academic experts regard Nasdaq’s proposal as impractical and an overreach. Instead of including a mandate, the critics say, the exchange could have gone for an incremental, softer approach based only on disclosure of diversity plans, statistics, and progress toward targets, which is what other top exchanges have adopted, such as the Australian Securities Exchange.
In its own research, Nasdaq found that both approaches move the needle: “[W]omen account for at least 30 percent of the boards of the largest companies in Australia, Sweden, and the United Kingdom, and in three other countries that have implemented disclosure requirements or suggested milestones,” according to the stock exchange’s filing with the SEC. “On average, women account for 31% of board seats in countries with gender mandates.”
Nasdaq’s plan is a hybrid of the two approaches. Combined with the disclosure of board diversity statistics, Nasdaq’s quota would put companies on the spot by asking them to justify why they don’t have the two diverse directors. For a mandate, it’s very moderate: Nasdaq set a low diversity target and a generous phase-in period for compliance, which ranges from two to five years depending on company size and other factors. Additionally, for noncompliant firms, Nasdaq is proposing to help them comply by offering resources such as free access to a network of diverse, board-ready candidates.
The business case for diversity is clear: Having women on boards has been linked to better financial performance, and a 2019 study showed companies with more women on the boards experienced less fraud. Just last week, a study showed there’s a positive correlation between gender diversity on corporate boards and innovation around climate change.
And yet there’s been a reluctance to diversify US boardrooms: Across the 3,000 largest publicly traded American corporations, women account for 21 percent of board directors, and members of racial and ethnic groups make up 12.5 percent. The Nasdaq diversity proposal would be an overdue wake-up call for companies to look outside their insular bubbles and draw in new talent and ideas. Other stock exchanges would be wise to follow its lead.
Editorials represent the views of the Boston Globe Editorial Board. Follow us on Twitter at @GlobeOpinion.
"board" - Google News
December 11, 2020 at 03:33AM
https://ift.tt/2JSumFH
Let Nasdaq lead the way on American corporate board diversity - The Boston Globe
"board" - Google News
https://ift.tt/2KWL1EQ
https://ift.tt/2YrjQdq
Bagikan Berita Ini
0 Response to "Let Nasdaq lead the way on American corporate board diversity - The Boston Globe"
Post a Comment