On Friday, August 6 the Securities and Exchange Commission (SEC) approved new Nasdaq diversity rules that encourage companies listed on their exchange to increase diversity on their corporate boards based on race and gender. Assemblymember Chris Holden who authored the California law – AB 979, which mandates racial diversity on corporate boards, applauded the decision.
“I applaud both Nasdaq and the SEC for taking this important step that will have a positive impact on racial and gender equality, and these companies’ bottom lines,” said Assemblymember Chris Holden. “I am encouraged that Nasdaq, the SEC, and the many companies leading the way on diversity, are doing their part to ensure the corporate world reflects the diversity of our country.”
The new rules requires each Nasdaq listed company to publicly disclose self-identified gender and racial characteristics and LGBTQ+ status of the company’s board of directors. It also requires each Nasdaq listed company to have at least two members of its board of directors who are Diverse, including at least one director who self-identifies as female and at least one director who self-identifies as an Underrepresented Minority or LGBTQ+. If they do not meet the benchmark the company must explain why.
The California law requires publicly held corporations headquartered in California to have at least one director from an underrepresented community by the close of 2021. In addition to the 2021 benchmark, AB 979 also requires corporate boards to include two members from underrepresented communities for corporations with more than four members, while corporations with more than nine must have a minimum of three by 2022. The law defines a director from an underrepresented community as an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender. California’s gender diversity law, SB 826, was authored by Hannah Beth Jackson that requires corporations based in California by the end of 2021 to have a minimum number to two female directors if the corporation has five directors or to three female directors if the corporation has six or more directors.
