The stock exchange’s rules, approved by the SEC last week, aim to push companies to get more serious about not just recruiting qualified directors from underrepresented communities, but also push stragglers to disclose why they’re falling behind.
Under Nasdaq’s rules, companies on the exchange are required to have at least one female board member and at least one who identifies as an underrepresented minority or LGBTQ—or provide statements explaining why they can’t meet the requirements. Companies also must annually disclose the gender and racial composition of their boards, as early as next year’s proxy season for some firms.
Shareholders concerned about diversity will have the data to vote against directors and offer proposals to spur diverse boards. Investors will also be able to scrutinize corporate statements about why they can’t recruit female or minority board directors. Companies will need to publish those statements on their websites or in the proxy materials they send to investors before annual meetings.