Nasdaq, an American stock exchange second only to the New York Stock Exchange, has decided to join the boardroom diversity quota bandwagon. According to the New York Times, this morning Nasdaq requested permission from the S.E.C. to require companies listed in its U.S. stock exchange to “have at least one woman and one ‘diverse’ director and report data on board diversity — or face consequences.”
This “diverse” director must self-identify as an underrepresented minority or as part of the L.G.B.T.Q. community (or both!). And for those companies that don’t disclose diversity information, they could face delisting. Others, that report data but don’t meet standards, must publicly explain their failure to meet Nasdaq’s standards.
While Nasdaq lobbied the S.E.C. to create a diversity disclosure rule for all companies, this request is a clear step towards their broader goal.
Notably, this step “would be the first time a major stock exchange demanded more disclosure than the law requires…It raises questions about whether exchanges could use their listing rules to force action on other hot-button issues, like climate change.”
Unfortunately, corporations have become increasingly involved in social issues including climate change, social justice and more. This move by Nasdaq, however, would have broad-reaching effects as it would affect the 3,249 companies listed on Nasdaq’s U.S. stock exchange.
But these quota requirements, as I wrote in a Policy Focus earlier this year, while stemming from good intentions, will undermine the hard work by women and minorities. Both groups have steadily been gaining representation in corporate boardrooms as they gain the experience and expertise for such positions, and requiring certain seats to be filled by specific demographic groups only cheapens the achievement.
Furthermore, there is no evidence that increasing the number of women on corporate boards improves the worklife or opportunities for women who are further down the workplace hierarchy. Just because a woman, or a minority, is in a position of power in a company, it does not mean that she will provide more support to those in similar demographic groups lower down the ladder.
We should hope that senior leadership would work to improve the opportunities for all of their employees, and not focus on specific demographics to obtain certain optics or fulfill a requirement like the one proposed by Nasdaq.