There is rising accountability regarding corporate board diversity, as evidenced by a rule Securities and Exchange Commission (SEC) recently adopted. This rule approves changes made by The Nasdaq Stock Market LLC (Nasdaq) that requires Nasdaq-listed companies to disclose voluntarily self-identified gender, race, and LGBTQ+ status for the company’s board of directors. Boards are then encouraged to set “aspirational diversity objectives” to have at least one board member who is female, and one who is either part of an underrepresented minority group or associating with the LGBTQ+ community.
The rule makes clear these diversity objectives are not a quota, mandate, or set-aside requirement. If there is a shortfall, the company will need to explain efforts taken to diversify the corporate board. To assist with meeting this goal, Nasdaq-listed companies will receive access to a board recruiting service.
With this rule, the SEC meets investor interests in making more informed decisions by having access to aggregate self-identification disclosures. The rule also heightens accountability of companies to make progress towards diverse representation on boards. This initiative is part of recent pressure put on companies to be more transparent with diversity results. The expectation for increased transparency and accountability among corporate boards is likely to be reflected by further commitment to and focus efforts on creating equitable workforces.
Another recent development by the SEC is a proposed rule filed on October 1, 2021, that recommends amending one of the annual reports issued by registered management investment companies. This rule would strengthen and standardize reporting on environmental, social, and governance-oriented matters. Among these matters would be diversity, equity, and inclusion issues.
DCI will keep you informed as the SEC continues to make changes that may enhance diversity.
By: Keli Wilson, Director, Workforce Equity & Chrisann Anderson, HR Analyst