Nasdaq Board Diversity Quotas Challenged
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.
Learn more about all of the customized and comprehensive solutions available through OneDigital Insurance, Financial Services and HR Consulting.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.
Securities offered through Valmark Securities, Inc. (VSI), a member of FINRA and SIPC. Investment advisory services offered through Valmark Advisers, Inc. (VAI), an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI are separate entities from OneDigital.
Unless otherwise noted, VAI/VSI is not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this document.