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Board of Directors Diversity
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California enacted legislation requiring California headquartered public corporations to include women on their board of directors by the end of 2019. The number of women required on the board depends on the total number of board members. Larger boards would require more women to serve on the board. Non-compliance could trigger fines. Many European nations have similar laws with some mandating at least 40% of the board of directors to be women.
On January 23, 2020 the CEO of Goldman Sachs announced they would refuse to help companies go public that did not have at least one diverse board member with an emphasis on women board members. Some research indicates companies with a diverse board, especially at least one woman on the board, outperform their peers. An overall consensus on the subject has not been reached as other research indicates diversity is not a contributing factor.
The NPR program MarketPlace reported on the Goldman announcement during their Jan 23 broadcast. You can hear the podcast of that story here:
https://www.marketplace.org/2020/01/23/goldman-sachs-pushes-for-more-diverse-boards-of-directors/
In addition to the audio of the story, the web page has a text version with links to a Harvard Business review article from March 2019 concerning how and when diversity on a board can improve results. Russell Malley
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Rank: Administration
Posts: 248
Thanks: 3 times
Was thanked: 50 time(s) in 44 post(s)
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The NASDAQ exchange submitted a proposal in December 2020 to the the SEC that would require companies listed on the NASDAQ to have a more diverse board of directors. The proposal would mandate at least 2 members of diverse backgrounds or to explain why they do not meet the requirement. For purposes of this proposal, "diverse background" means one person who self-identifies as female and one person who self-identifies as an under-represented minority or LBGTQ. The proposal cited studies indicating companies with diverse boards perform better financially and have better governance. If the proposal is accepted by the SEC, companies would also be responsible for reporting on the diversity of their boards. Companies would have between 2 to 5 years to comply with the proposal depending on their listing tier.
NASDAQ has 3 listing tiers. Each tier has different listing requirements. NASDAQ Global Select Market has the most stringent requirements, NASDAQ Global Market is the middle tier, while NASDAQ Capital Market is the least stringent tier.
Russell Malley
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Rank: Administration
Posts: 248
Thanks: 3 times
Was thanked: 50 time(s) in 44 post(s)
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The proposed NASDAQ rule change to mandate board diversity was recently approved by the Securities and Exchange Commission (SEC). Companies with 5 or fewer board members must include a woman or underrepresented minority on their board of directors. Companies with more than 5 board members must include a woman and a member of an underrepresented minority on their board. Companies must explain why they do not meet these requirements, if they do not. Also, board diversity reports will be required. There are provisions allowing companies time to comply with the new requirements. NASDAQ does have pages on their web site dedicated to this topic. Go to https://www.nasdaq.com/board-diversity for more information. Russell Malley
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Board of Directors Diversity
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