Executive Benefits

Nasdaq Board Diversity Quotas Challenged

Nasdaq Board Diversity Quotas Challenged

Author Executive Benefits Team
Date September 9, 2021

Earlier this month, the SEC approved the new Nasdaq Board Diversity quota requirement. Now the requirement is being questioned in court, following a petition for review filed in the U.S. Court of Appeals.

On August 19, we shared the update that the Securities and Exchange Commission (SEC) has approved Nasdaq’s new board diversity quota policy. The requirement, which would apply to most of the 3000 Nasdaq listed companies, called for each company’s board of directors to include at least one woman on the company’s board of directors plus one additional board member who either is from a racial minority or who identifies as gay, lesbian, transgender, or bisexual. 

As we explained in, The New Diversity in the Boardroom Requirement, the companies would be required to “publicly disclose information regarding their boards, or to offer a publicly disclosed explanation as to why they fail to meet this new requirement”. Companies with five or fewer board members would be accountable only for meeting the requirement of having one diverse board member.

However, the Alliance for Fair Board Recruitment (AFFBR), a nonprofit membership organization incorporated in the state of Texas, filed a Petition for Review in the United States Court of Appeals for the Fifth Circuit The appeal seeks review of the SEC’s approval.

Edward Blum, president of AFFBR, stated, “The race, sex and sexual identity board quotas required by NASDAQ are unfair and illegal. This rule violates our nation’s civil rights laws and Constitution and should be struck down by the courts without delay.”

Additional Insights on Mandated Board Diversity

You can read the full content of the initial SEC approval as it appeared on the Federal Register on August 12, 2021: “Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Approving Proposed Rule Changes, as Modified by Amendments No. 1, to Adopt Listing Rules Related to Board Diversity and to Offer Certain Listed Companies Access to a Complimentary Board Recruiting Service,” Release No. 34-92590

And read the full content of the August 18, 2021, media announcement published on behalf of Alliance for Fair Board Recruitment (AFFBR) here: “Nasdaq Board Diversity Quotas Challenged in Federal Court by the Alliance for Fair Board Recruitment.

Noteworthy is that earlier this summer (July 13, 2021) AFFBR filed a federal lawsuit challenging the constitutionality of recent California statutes SB 826 and AB 979—two laws that require all publicly traded California-based corporations to implement sex and race quotas for board members.


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