Updated Jan. 21/Originally published Jan. 11 – There’s a lot of heavyweight support behind Nasdaq’s bid to diversify the boards of the companies listed on its exchange — the endorsements during the public comment period currently number over 150 — but the proposal is certainly not without its heavy detractors, most of whom appear to be male individual investors and many of whom are downright apoplectic at the prospect.
As comments both for and against the initiative continue to roll in from politicians, S&P 500 companies and advocacy organizations, Nasdaq sent a letter to the Securities and Exchange Commission (SEC) saying that they were exercising their option to extend the time period allotted for the consideration of the proposal, which would dictate that Nasdaq-listed companies be transparent about their board diversity stats and have at least one female board director and one otherwise diverse director. The exchange’s Friday letter indicated that March 11 would be the new deadline for the SEC to take action on the proposed rule.
There were around 160 responses to the pending diversity rule published on the SEC site as of Jan. 21, with more than 75 percent of those expressing support, though some of those endorsements were accompanied by weighty caveats. Several organizations supported the basic principle of diversity guidelines but suggested that Nasdaq’s plan was not inclusive enough — a handful of letters, for example, suggested that those with disabilities be considered an underrepresented minority group.
A letter from the National Urban League, a business advocacy organization representing African Americans, said that while the purpose of the proposed rule was “laudable,” its definition of diversity could allow for “only Caucasian women and Caucasian LGBTQ+ directors” to be added to boards, which “reinforces a racial exclusion that is at least as old as the nation.” National Urban League President Marc Morial wrote that the rule “elevates and protects gender” and should instead “require the addition of both an African American board member (or another racial/ethnic minority) and a member of the LGBTQ community, one of which might also be female.”
Some commenters complained about the proposal’s “toothlessness” when it comes to enforcement: Companies would have have one year to disclose diversity data and a second year to comply with the rules or face delisting; however, companies would be allowed to explain why they have a different “diversity philosophy” that does not allow for the quotas to be met. Others applauded the “flexibility of the approach,” with Sen. Dianne Feinstein saying Nasdaq “strikes an appropriate balance between strongly encouraging board diversity while not making it mandatory.”
Microsoft offered its unfettered approval of the plan, applauding Nasdaq for its efforts to buoy investor confidence by pushing companies to “adopt governance structures and follow practices that maximize their chances of long-term stability, predictability, and success.” Facebook, too, in a letter signed by COO Sheryl Sandberg that highlighted its advancement on diversity initiatives, voiced support, as did Goldman Sachs, which pledged last year not to underwrite the IPO aspirations of any companies without at least one diverse board director. Ariel Investments Co-CEOs Mellody Hobson and John Rogers, Jr. wrote, “This is the right approach. What gets measured, gets done. Companies set targets for many other important business initiatives.”
While some individuals expressed strong support of the initiative — Cynthia Overton wrote that they were “relying on returns from my portfolio of investments in publicly traded companies to retire” and believed diverse boards would help achieve that — others were adamantly opposed, with many of them saying Nasdaq should not have a say in who gets appointed to a company’s board.
Walter Donnellan, who has invested in Nasdaq stocks for two decades, wrote that “your filing with the SEC is the first thing I have come across that makes me think it is time to move my money.” Mark Blair said “we will never eliminate bigotry in society-at-large by forcing companies to make bigoted decisions in order to be listed on NASDAQ.” Phil Goldstein of Bulldog Investors took a satirical approach, writing, “I am shocked that NASDAQ has ignored one of the largest groups of historically disadvantaged persons – short people,” as did a letter-writer purporting to be the infamous Titania McGrath, a parody personality created by comedian Andrew Doyle expressly to troll “wokeness,”
Some opponents took an amusing — if poorly conceived — satirical approach. One letter-writer purporting to be the infamous Titania McGrath, a parody personality created by comedian Andrew Doyle expressly to troll “wokeness,” wrote that the proposal should go beyond gender, race and sexual orientation to include ex-convicts. “For example, Bernie Madoff is an indisputably talented marketing genius who would be a great asset to any board if and when he is released from prison,” reads the letter, which, according to Doyle’s rep, was not authored by the “real” McGrath. Phil Goldstein of Bulldog Investors wrote that he was “shocked that NASDAQ has ignored one of the largest groups of historically disadvantaged persons – short people.”
A Nasdaq spokesperson said they did not know when the SEC would reach a final decision and that “we look forward to the dialogue around this topic and listening to all perspectives.”
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